UM RegTech explores the benefits of Initial Exchange Offerings (IEOs) in its latest newsletter, as the crypto landscape shifts away from Initial Coin Offerings (ICOs).
Over the past few years, investors in the cryptosphere have grown savvier to fundraising risks, especially when it comes to the once-popular Initial Coin Offering (ICO). Now, a new mode of offering has arrived on the scene — Initial Exchange Offerings (IEOs) are looking to upend the scam-infested ICO market.
But can IEOs deliver on promises of greater due diligence and accountability? Will they ever truly replace the ICO, which many continue to see as the ultimate manifestation of the free market?
In Initial Exchange Offerings, the exchange acts as a counterparty that conducts due diligence on token issuers and Know-Your-Customer (KYC) protocols on investors.
With IEOs, crypto investors are likely to benefit from the exchanges’ screening measures before the tokens are put on the market. Moreover, IEOs could offer greater market liquidity for the tokens, as the coins are instantly tradable on the host exchange, compared to non-exchange ICOs that could see trading delayed by months after the ICO has ended.
Most importantly, for regulators, IEOs offer an opportunity to impose regulations on the crypto industry by targeting exchanges for enforcement. Part of the reason ICO scams have been able to proliferate is because of the difficulty of enforcing regulations on individual issuers.
Instead of targeting issuers for enforcement, regulators could turn their attention to exchanges. By the same token, exchanges could benefit from greater investor confidence due to the regulatory scrutiny.
For more insights into why IEOs could be the next fundraising trend, catch the full article in the second issue of UM RegTech’s VisioBloc report: The Crypto-Fundraising Landscape.
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