IDEAS home Printed from https://ideas.repec.org/a/wly/accper/v19y2020i4p413-437.html
   My bibliography  Save this article

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

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/1911-3838.12243
    Download Restriction: no

    File URL: https://libkey.io/10.1111/1911-3838.12243?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    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.
    2. Fisch, Christian, 2019. "Initial coin offerings (ICOs) to finance new ventures," Journal of Business Venturing, Elsevier, vol. 34(1), pages 1-22.
    3. Winifred Huang & Michele Meoli & Silvio Vismara, 2020. "The geography of initial coin offerings," Small Business Economics, Springer, vol. 55(1), pages 77-102, June.
    4. 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.
    5. 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.
    6. Moll, Jodie & Yigitbasioglu, Ogan, 2019. "The role of internet-related technologies in shaping the work of accountants: New directions for accounting research," The British Accounting Review, Elsevier, vol. 51(6).
    7. Jana Schmitz & Giulia Leoni, 2019. "Accounting and Auditing at the Time of Blockchain Technology: A Research Agenda," Australian Accounting Review, CPA Australia, vol. 29(2), pages 331-342, June.
    8. 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, September.
    9. Erik Ackermann & Carolin Bock & Robin Bürger, 2020. "Democratising Entrepreneurial Finance: The Impact of Crowdfunding and Initial Coin Offerings (ICOs)," FGF Studies in Small Business and Entrepreneurship, in: Alexandra Moritz & Joern H. Block & Stephan Golla & Arndt Werner (ed.), Contemporary Developments in Entrepreneurial Finance, pages 277-308, Springer.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. José Campino & Ana Brochado & Álvaro Rosa, 2022. "Initial coin offerings (ICOs): Why do they succeed?," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-35, December.
    2. Lars Hornuf & Theresa Kück & Armin Schwienbacher, 2022. "Initial coin offerings, information disclosure, and fraud," Small Business Economics, Springer, vol. 58(4), pages 1741-1759, April.
    3. Joern H. Block & Alexander Groh & Lars Hornuf & Tom Vanacker & Silvio Vismara, 2021. "The entrepreneurial finance markets of the future: a comparison of crowdfunding and initial coin offerings," Small Business Economics, Springer, vol. 57(2), pages 865-882, August.
    4. Shrestha, Prabal & Arslan-Ayaydin, Özgür & Thewissen, James & Torsin, Wouter, 2021. "Institutions, regulations and initial coin offerings: An international perspective," International Review of Economics & Finance, Elsevier, vol. 72(C), pages 102-120.
    5. Chitsazan, Hasti & Bagheri, Afsaneh & Tajeddin, Mahdi, 2022. "Initial coin offerings (ICOs) success: Conceptualization, theories and systematic analysis of empirical studies," Technological Forecasting and Social Change, Elsevier, vol. 180(C).
    6. Ferdinand Thies & Sören Wallbach & Michael Wessel & Markus Besler & Alexander Benlian, 2022. "Initial coin offerings and the cryptocurrency hype - the moderating role of exogenous and endogenous signals," Electronic Markets, Springer;IIM University of St. Gallen, vol. 32(3), pages 1691-1705, September.
    7. Magnus Schückes & Tobias Gutmann, 2021. "Why do startups pursue initial coin offerings (ICOs)? The role of economic drivers and social identity on funding choice," Small Business Economics, Springer, vol. 57(2), pages 1027-1052, August.
    8. Luisa Faust & Maura Kolbe & Sasan Mansouri & Paul P. Momtaz, 2022. "The Crowdfunding of Altruism," JRFM, MDPI, vol. 15(3), pages 1-29, March.
    9. Paola Cerchiello & Anca Mirela Toma & Marco Caluzzi, 2021. "ICOs White Papers: identity card or lark mirror?," DEM Working Papers Series 197, University of Pavia, Department of Economics and Management.
    10. Anton Miglo, 2022. "Choice between IEO and ICO: Speed vs. Liquidity vs. Risk," FinTech, MDPI, vol. 1(3), pages 1-18, September.
    11. Simon Albrecht & Bernhard Lutz & Dirk Neumann, 2020. "The behavior of blockchain ventures on Twitter as a determinant for funding success," Electronic Markets, Springer;IIM University of St. Gallen, vol. 30(2), pages 241-257, June.
    12. Dmitri Boreiko & Dimche Risteski, 2021. "Serial and large investors in initial coin offerings," Small Business Economics, Springer, vol. 57(2), pages 1053-1071, August.
    13. Kolbe, Maura & Mansouri, Sasan & Momtaz, Paul P., 2022. "Why do video pitches matter in crowdfunding?," Journal of Economics and Business, Elsevier, vol. 122(C).
    14. Mansouri, Sasan & Momtaz, Paul P., 2022. "Financing sustainable entrepreneurship: ESG measurement, valuation, and performance," Journal of Business Venturing, Elsevier, vol. 37(6).
    15. Patel, Ritesh & Migliavacca, Milena & Oriani, Marco E., 2022. "Blockchain in banking and finance: A bibliometric review," Research in International Business and Finance, Elsevier, vol. 62(C).
    16. Sapkota, Niranjan & Grobys, Klaus, 2023. "Fear sells: On the sentiment deceptions and fundraising success of initial coin offerings," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 83(C).
    17. Paul P. Momtaz, 2021. "Initial coin offerings, asymmetric information, and loyal CEOs," Small Business Economics, Springer, vol. 57(2), pages 975-997, August.
    18. Meoli, Michele & Vismara, Silvio, 2022. "Machine-learning forecasting of successful ICOs," Journal of Economics and Business, Elsevier, vol. 121(C).
    19. Lennart Ante, 2020. "A place next to Satoshi: foundations of blockchain and cryptocurrency research in business and economics," Scientometrics, Springer;Akadémiai Kiadó, vol. 124(2), pages 1305-1333, August.
    20. de Andrés, Pablo & Arroyo, David & Correia, Ricardo & Rezola, Alvaro, 2022. "Challenges of the market for initial coin offerings," International Review of Financial Analysis, Elsevier, vol. 79(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:accper:v:19:y:2020:i:4:p:413-437. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://doi.org/10.1111/(ISSN)1911-3838 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.