Initial Coin Offerings (ICOs) are proving to be a common and trendy new way for businesses to raise capital, however what role are Accountants playing in this dynamic market?
An Initial Coin Offering (ICO) is a new way for businesses to generate assets; they do this by offering coins or tokens to investors in exchange for payment, made in a cryptocurrency rather than a normal jurisdictions currency.
The coins or tokens are traded for investment in the project. Fuelled by the ease and simplicity with which companies can use an ICO to obtain funding for new ventures this dramatically increased activity and therefore demand last year.
Investors face risks from fraud – the most consistently identified ICO risk. Publicity about the rapidly increasing values of cryptocurrencies has contributed to the surge in activity, so it’s not surprising that ICOs are a potentially easy way for fraudsters to make money.
Money laundering is again a crucial risk for economies and regulators, who will also have concerns around unregulated ICOs which have knock-on effects to market stability.
Understanding the risks and issues, perceived and evidenced, around ICOs provides context for the increased regulatory involvement.
There has been an outbreak of recent action from regulators in response to the surge in ICO activity by issuing consistent warnings of the inherent risks in ICOs and reminders of the requirement to comprehend and appreciate the fundamental nature of specific investments.
ICOs create wide-ranging implications for Bookkeepers and Accountants, opening up opportunities for a range of new services however also raising attention towards moral issues, ethic and other potential security risks.
Accountants must keep well-informed and up-to-date with the developments surrounding ICOs as blockchain and distributed ledger technologies have the potential to be a disruptor of fiscal technologies.
There is a huge opportunity for Accountants to assist comapnies by keeping up-to-date with regulatory announcements in their jurisdiction of operation, and more chiefly to bring their risk training in line with the local standards regarding compliance and governmental guidelines.