Back when the third millennium had first dawned on the world, our TV screens would light up with the image of three cute but fiercely badass sisters taking on criminals like nobody’s business. Now, Blossom, Bubbles, and Buttercup are nothing but a fragment of a nostalgic childhood older millennials miss with fits and starts. If one of these former viewers were to be a crypto-blockchain enthusiast fed up with the barrage of scams reported in the ICO (initial coin offerings) industry, they would probably hope for something akin to the Powerpuff girls to save the darkening day. Hold on, we know that’s an unlikely thought to have occurred even with all the furrowing brows and troubled minds, but just in case it did, this wish appears to have been fulfilled.
Before Jojo the monkey accidentally spilled the mutagenic substance Chemical X into a concoction for perfect little girls, Professor Utonium had little way of reining in the criminals of Townsville. Today, crypto-world seems to be the new Townsville and thankfully it seems that legal compliance has served as a good enough substitute for Chemical X to transform the heady concoction of rogue ICOs to churn out its own version of superheroes. The new kid wonder in crypto town is clearly the STOs that are backed by securities such as profit sharing, dividends and equity. These securities now masquerade as the modern-day Messiah of blockchain’s Townsville.
When ICO had arrived on the scene, it had quickly surpassed its more legally complaint but less flamboyant cousin IPO (initial public offering), going on to raise almost $4 billion in 2017 alone. However, this raging success came with a caveat: ICOs were reckless prodigal sons that often turned out to be scams or had investments stolen through phishing. Kaspersky Labs reported that cybercriminals had managed to pocket almost $2.3 million through phishing in Q2 of this year and a January 2018 report by Ernst and Young revealed that about 10% of all ICO earnings were stolen by swindlers. Increasingly, the regulators, particularly the US SEC (Securities and Exchange Commission) began to clamp down on ICOs with a number of cases being reported, including the Munchee Inc. that had officially made false claims about the token they were offering. An ICO whitepaper, unlike an IPO prospectus, lacks an industry standard which makes accountability and transparency hard to achieve.
Now, however, a novel entrant, the Security Token Offering (STO) is changing the game by combining best of both worlds: ICO and legal compliance. They are a lot like traditional shares in the sense that they allow investors to have an actual stake in the company and also file paperwork much like an IPO would. With a real stake in place, profit sharing and dividends become possible, and equities also back up the premise of this genius instrument. With an instrument that is the blue-eyed boy of both investors and regulators, Cryptoville can finally heave a sigh of relief.