What Needs to Be Done With the Elephant in the ICO Room?
There is an elephant in the room
and that room is the current ICO market. The elephant is the unignorable fact that the majority of ICOs offer no protection to their token buyers who consider themselves as investors.
These buyers are not investors.
In 2017, initial coin offerings, or ICOs, emerged into the big time. Over the course of the year, startups conducting an ICO as a way of raising startup capital raised over $6.5 billion. Since then, many ICOs have issued utility tokens under the guise of security tokens, and they have raised millions of dollars by promising their holders huge returns and part of their income. In reality, they may not able to deliver on these promises.
The difference between a utility token and a security token was explained by Laimonas Noreika, the CEO of DESICO, the world’s first fully legal security token platform: “if Google were to have launched an ICO to raise capital by selling utility tokens, then Google utility token holders would now receive free Google ads in exchange for their tokens. Were Google to have issued security tokens, then Google security token holders would now be eligible to revenue share of the company.”
A security token is an investment and a financial product. It is a token that gives its holder ownership of a real asset, which can range from tokenized commodities and tokenized real estate, to tokenized funds. Meanwhile, a utility token simply provides access to a platform or product, and unlike a security token, it is not an investment and does not provide its holder with any rights.
Due to the different characteristics of security tokens and utility tokens, plus the lack of legal regulation, this has led to the ICO industry being shrouded in mystery. In mid-2017, this perception surrounding the credibility of ICOs led to the U.S. Securities and Exchange Commission, the SEC, cracking down on security ICOs and making them “subject to the requirements of the federal securities law.”
“The ICO industry is in desperate need for the correct legal frameworks and infrastructure to issue security tokens,” Noreika continued. “This is because finance experts predict that 2018 will be the year when security tokens begin to outstrip utility tokens, since more capital is expected to flow into the security crypto asset class. By the first quarter of 2019, it is estimated that ICOs issuing security tokens will outnumber those issuing utility tokens.” Empowered by the belief that security tokens are the future of a global tokenized economy, the DESICO team will introduce the world’s first fully legally compliant, and therefore game-changing, infrastructure to issue and trade security tokens.
DESICO’s full legal compliance is rooted in its country of operation. DESICO has chosen to operate from Lithuania, a Eurozone member and European Union member state. Lithuania holds a significant legal advantage due to its crowdfunding law, which makes it one of the few countries in the world, and the only EU country, to fully legally regulate ICOs. According to a recent report by Tokendata, Lithuania ranks third in the world behind the only the United States and China in terms of capital raised through ICOs in 2018. Furthermore, 2018 has seen startups from Lithuania successfully raise $249 million so far.
DESICO is a concrete example of Lithuania’s open attitude towards globally-operating blockchain companies. It has received support from the government backed business development agency, Enterprise Lithuania, as well as the country’s Ministry of Finance, with finance minister, Mr. Vilius Šapoka, praising DESICO for its encouragement in developing “Lithuania’s fintech and blockchain communities by promoting the settlement of global blockchain and fintech businesses in Lithuania.”
With its infrastructure to issue, buy, and sell security tokens in full compliance with the law, its internationally-experienced team of advisors and employees, plus its backing from the government of an EU member state, DESICO will not just eliminate the elephant in the room of ICOs. It will set new standards for the global ICO industry. Welcome to DESICO. Welcome to the world of security tokens.
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