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Risks and Benefits of Initial Coin Offerings: Evidence from impak Finance, a Regulated Initial Coin Offering†

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  • Emilio Boulianne
  • Mélissa Fortin

Abstract

This study provides a better understanding of the business and the regulated environment surrounding initial coin offerings (ICOs). An ICO is a call for funding to raise funds through a blockchain, where cryptoassets are issued. Key stakeholders involved are the firms launching ICOs, the investors, and the financial regulators. We conducted a case study of a firm that launched an ICO, impak Finance, the first regulated ICO in Canada. Based on the interviews of key respondents, we developed a framework identifying the main risks and benefits for firms to performing an ICO, showing differences between unregulated and regulated ICOs. Our study makes a number of research and practical contributions. First, we document the case of the first regulated ICO in Canada. The interviews conducted provided access to privileged insider information. Second, very few studies have been conducted on the impact of blockchains as a financing vehicle. ICOs using blockchains may be disruptive not only from a technology standpoint but also from a financial standpoint. While the possible applications of blockchains are unknown to us to date, we do know that blockchains have the potential to challenge the traditional financial system monitored by financial regulators. Last, the study identifies, through a framework, the risks and benefits of performing an ICO in an unregulated versus a regulated context, which has practical implications for firms operating in the fintech space. We trust that this framework will be useful for firms using ICOs, for investors, and for financial regulators. Risques et avantages des premières émissions de cryptomonnaie (ICO) : L'expérience d'impak Finance, une ICO réglementée La présente étude permet de mieux comprendre la conduite des affaires et le cadre réglementé entourant les premières émissions de cryptomonnaie (ICO). Une ICO est un appel au financement visant à amasser des fonds par l'entremise d'une chaîne de blocs où sont émis des cryptoactifs. Les principales parties prenantes sont les sociétés qui lancent une ICO, les investisseurs et les organismes de réglementation financière. Nous avons mené une étude de cas portant sur une société qui a lancé une ICO, impak Finance, qui est devenue la première ICO réglementée au Canada. À la suite d'entretiens avec des répondants clés, nous avons mis au point un cadre qui permet aux sociétés qui effectuent une ICO d'en cerner les principaux risques et avantages, et fait ressortir les différences entre les ICO réglementées et les ICO non réglementées. Notre étude contribue de diverses façons à la recherche et à la pratique dans ce domaine. D'abord, nous documentons la toute première ICO au Canada. Les entrevues réalisées nous ont permis d'accéder à de l'information privilégiée. Ensuite, très peu d’études ont été effectuées sur l'impact de la chaîne de blocs en tant que véhicule financier. Les ICO qui font appel à une chaîne de blocs peuvent avoir un effet perturbateur tant sur le plan technologique que financier. Bien qu’à ce jour, nous ne connaissions pas toutes les applications possibles de la chaîne de blocs, nous savons qu'elle peut remettre en question le système financier conventionnel surveillé par des organismes de réglementation. Enfin, l’étude établit un cadre qui cerne les risques et avantages liés au lancement d'une ICO dans un contexte non réglementé par rapport à un contexte réglementé, ce qui a des conséquences sur le plan pratique pour les sociétés du secteur de la technologie financière. Nous sommes convaincus que ce cadre sera utile pour les sociétés qui misent sur des ICO, les investisseurs et les organismes de réglementation financière.

Suggested Citation

  • Emilio Boulianne & Mélissa Fortin, 2020. "Risks and Benefits of Initial Coin Offerings: Evidence from impak Finance, a Regulated Initial Coin Offering†," Accounting Perspectives, John Wiley & Sons, vol. 19(4), pages 413-437, December.
  • Handle: RePEc:wly:accper:v:19:y:2020:i:4:p:413-437
    DOI: 10.1111/1911-3838.12243
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    References listed on IDEAS

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    1. Adhami, Saman & Giudici, Giancarlo & Martinazzi, Stefano, 2018. "Why do businesses go crypto? An empirical analysis of initial coin offerings," Journal of Economics and Business, Elsevier, vol. 100(C), pages 64-75.
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    6. Alfreda Šapkauskienė & Alfreda Šapkauskienė & Ingrida Višinskaitė, 2020. "Initial Coin Offerings (ICOs): benefits, risks and success measures," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 7(3), pages 1472-1483, March.
    7. Alexandra Moritz & Joern H. Block & Stephan Golla & Arndt Werner (ed.), 2020. "Contemporary Developments in Entrepreneurial Finance," FGF Studies in Small Business and Entrepreneurship, Springer, number 978-3-030-17612-9, December.
    8. John P. Conley, 2017. "Blockchain and the Economics of Crypto-tokens and Initial Coin Offerings," Vanderbilt University Department of Economics Working Papers 17-00008, Vanderbilt University Department of Economics.
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    Cited by:

    1. Fortin, Mélissa & Pimentel, Erica, 2024. "Bitcoin: An accounting regime," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 99(C).
    2. Akter, Mohsina & Kummer, Tyge-F. & Yigitbasioglu, Ogan, 2024. "Looking beyond the hype: The challenges of blockchain adoption in accounting," International Journal of Accounting Information Systems, Elsevier, vol. 53(C).
    3. Annie Lecompte, 2024. "The devil is in the details: a taxonomy of red flags of fraudulent initial coin offering projects," SN Business & Economics, Springer, vol. 4(11), pages 1-21, November.

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