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"Initial coin offerings" are still in their early days, but they've already attracted a huge amount of interest (or hype) as well as scrutiny from regulators. At least two of these new tokens or digital currencies recently reached a new milestone: $1 billion in market cap. At the same time, others are folding in the face of potential legal troubles with the Securities and Exchange commission.
Why it matters: Expect more of both of these. Initial coin offerings are an unregulated way to raise funds for a new cryptocurrency venture. Tokens and cryptocurrencies are still in the honeymoon phase, drawing interest from everyone. But this hype is also putting pressure on regulators to step in.
Unicorns: As TechCrunch reported, OmiseGO (OMG) and Qtum both crossed that mark this week within mere months after their initial token sales.
- OMG's tokens rose in value from $0.27 to over $11. Qtum's went from $0.30 to more than $18.
- Of course, these valuations are volatile and could come down below the $1 billion mark.
- Both have yet to release their planned products (as is the case with most ICOs, through which investors fund the development of an idea).
Meanwhile: Protostarr, which raised roughly $47,000 through its token sale in August, has decided to shut down and refund investors after it was contacted by the SEC, Forbes reported on Friday. Protostarr was described as a way for rising internet stars on video streaming platforms like YouTube and Twitch to get funded by their fans.
- Protostarr was contacted by the SEC just a few weeks after the agency issued a warning last month that some token sales may be subject to securities laws.
- Unlike many others, Protostarr told Forbes that it didn't consult with attorneys ahead of time and didn't notice the SEC's statements until after its token sale had begun.