Category Archives: initial exchange offering

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IEOs, ICOs, Whatever the Name, Regulation is the Issue

IEOs, ICOs, Whatever the Name, Regulation is the Issue (1)

With Initial Exchange Offerings (IEOs) gaining in popularity, industry experts have been suggesting that their uncertain regulatory status doesn’t necessarily mark an improvement as a way of generating new capital.

An IEO is conducted via a cryptocurrency exchange. Unlike Initial Coin Offerings (ICOs), an IEO is administered by a crypto exchange on behalf of the startup that seeks to raise funds with its newly issued tokens. ICOs raised nearly USD 30 billion over a period of three years until hitting a wall in 2018/2019 as the SEC cracked down on fraudulent activity and illegal offerings blighting the market.

Many analysts see IEOs as a way of sidestepping strict market regulation, but Peter Van Valkenburgh, director of research at advocacy group Coin Center in Washington, begs to disagree that there is any mileage in this argument. He suggests:

“I don’t expect IEOs to result in better outcomes… From a regulatory and legal standpoint, there’s not going to be much difference here… Calling it now an IEO is not going to change your obligation to the potential issuer of that token if the token fits the test for a security, which I think in many cases it will.”

Crypto advisory firm TokenMarket’s CEO Ransu Salovaara claims that whatever the method of raising capital, tokens still need to work as utility tokens in the long run. Cryptocurrency research firm InWara claimed that only 30% of IEOs launched this year had what it calls a “minimum viable product” at the sale with most offering simply a website and a white paper.

A recent InWara research report into IEOs found that many exchanges don’t screen new products launched on their platforms, often offering subjective evaluation:

“That’s the problem here: there is no standardized vetting process… And as long as exchanges have the freedom to decide where to draw the line, bad actors, and fraud crypto projects will always creep into the limelight.”


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Blockpass to Provide KYC Verification for Bitfinex’s New IEO Platform

Blockpass, a blockchain identity protocol has announced that it will provide KYC and AML authentication services for the upcoming Ampleforth IEO conducted on the Tokinex platform.

Tokinex is an Initial Exchange Offering (IEO) platform which was presented by parent companies, Bitfinex and Ethfinex last month. It allows users to participate in pre-vetted token sales from the various ventures within the crypto industry. The platform has been tailored keeping user experience in account in order to deliver a simple and reliable contribution process.


Blockpass announces identity verification services for Ampleforth IEO on tokinex

Ampleforth is a unique digital asset protocol for ‘smart commodity-money’. It uses trusted oracles to obtain exchange-rate information and makes it available to holders of its units by a relevant increase or decrease in the tokens held by them. The AMPL supply alters in accordance with the price deviation from a USD 1 target.

The IEO is scheduled to run from 13 to 19 June 2019, aiming to reach USD 4.9 million.

Henry Child, Commercial Strategy at Tokinex and Ethfinex, said:

“Tokinex is proud to partner with Blockpass, this demonstrates both platform’s commitments to data privacy and user experience. Blockpass is leading the way in data sovereign verification and we are delighted to deliver this solution to the IEO space.”

Blockpass is a production-ready Regtech platform which aids in verification of humans (KYC), objects (KYO) and connected devices (KYD). Blockpass enables the development of new applications that depend on trusted relations between the various entities.

The CEO of Blockpass, Adam Vaziri said:

“The beauty of using the Blockpass App for identity verification during the customer onboarding process is how quick and easy it really is.”

He further stated:

“For customers who already have a Blockpass identity, they simply scan the QR code and click submit, and the company receives all their documents, pre-vetted and ready to go. This IEO is a perfect use case for our platform, taking the pain out of signing up to this great new service, Tokinex.”

Previously, Blockpass had collaborated with the parent company of Tokinex, Ethfinex and provided identity verification services to many ICOs hosted by the company. In May, Blockpass announced a partnership with Waves to ensure straightforward and transparent tools for business. Some of the other partnerships of Blockpass in 2019 include Tokenomica and the BBFTAEmploying RegTech solutions to improve AML/KYC has proven to be a smart strategy, limiting the problems while protecting all societal interests.

IEO stakeholders have to register on a certain exchange and complete KYC/AML procedures.

Other services similar to Blockpass include Daonomic, which provides self-service KYC forms for KYC/AML verification. There is also a partnership between the crypto exchange Binance and risk-management firm IdentityMind to enhance KYC/AML verification.


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IEO Offers Light Post-ICO Era, but Not All Are Convinced

IEO Offers Light Post-ICO Era, but Not All Are Convinced

After the apparent bursting of the initial coin offering (ICO) bubble, startups have been struggling to raise funds through the crypto or token model of token/coin offerings as investor interest dwindled and price problems continued. That is, until 2019 introduced the concept of initial exchange offerings (IEOs).

Retail investors have warmed up to the idea of buying tokens for a project that has already been assessed by a trusted entity, in this case cryptocurrency exchanges, believing that the likelihood of getting scammed by a project is far less if the project has been approved by an exchange.

As reported by Bloomberg, crypto analytics firm CoinSchedule has recorded 23 such offerings already since February 2019, raising a total of USD 180 million. Bittrex CEO Bill Shihara, whose own platform launched its first IEO this month, selling out in under 1 minute, spoke in positive terms of the new concept:

“It [IEO] has the potential to be larger than the ICOs of 2017. We are seeing significant demand both from our users and token teams.”

However, not everyone is viewing this with positive eyes. Zach Fallon, a securities lawyer who worked on ICO-related issues at the US Securities and Exchange Commission until last year, makes a brutal assessment that IEOs “take everything from an ICO and make it worse”. He believes that IEOs are still exposing investors to the risk of fraud because the vetting processes are not transparent nor standardized.

ICOs have not yet died completely. CoinSchedule shows that ICOs have raised USD208 million, only slightly more than IEOs in their early stages of discovery.


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