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Risks and challenges of initial coin offerings

Author

Listed:
  • Tasca, Paolo
  • Vigliotti, Maria Grazia
  • Gong, Hui

    (School of Finance and Accounting, UK)

Abstract

Initial coin offerings (ICOs) enable start-ups to raise investment funds. They are challenging the way companies are financed. To date, hundreds of ICOs have collectively raised around US$4bn. Other several hundred ICOs are currently running, suggesting that this phenomenon will persist in the future. ICOs have received a lot of criticism and are under scrutiny from regulators, such as the Monetary Authority of Singapore (MAS) and the US Securities and Exchange Commission (SEC). This paper considers the technical, financial and regulatory risk of ICOs. The paper shows that ICOs can generate higher returns than traditional financial instruments, yet since 2013 a quarter of the projects have gone bankrupt or suffered significant cost overruns.

Suggested Citation

  • Tasca, Paolo & Vigliotti, Maria Grazia & Gong, Hui, 2018. "Risks and challenges of initial coin offerings," Journal of Digital Banking, Henry Stewart Publications, vol. 3(1), pages 81-96, August.
    • Handle: RePEc:aza:jdb000:y:2018:v:3:i:1:p:81-96
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    More about this item

    Keywords

    blockchain; distributed ledger technologies; cryptocurrencies; Bitcoin; tokens; initial coin offering; ICO; Ethereum; token trading; risk management; smart contracts;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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