Investors have been taking note of recent trends as the initial coin offering (ICO) market continues to contract, offering them new investment opportunities.
According to a new report by ICORating, utility token projects are becoming less popular while service and security token offerings gain momentum. Yet even with their decrease, utility tokens and hybrid token offerings remain some of the most successful offerings, according to this report.
According to the agency, security token ventures increased by 1.66% year over year in Q3, while those offering service tokens surged 6.55% year-on-year and utility token providers saw their numbers fall 10.07% year on year, per their report.
Nearly half of ICOs held in Q3 were for service tokens (tokens used to pay project services), and one quarter included utility tokens used by protocols. Token counts are decreasing: approximately 12.5% of projects offered hybrid tokens that combined payments for services with rewards for work performed, with 6.5% providing security tokens (secured by obligations like promises of dividend payments or receipt of company shares), respectively.
Investors appear to prefer hybrid, reward and utility token ICOs over others in terms of investor attraction; hybrid tokens in particular have raised the most funds this quarter while cryptocurrency, security and service offerings raised less than USD 250,000 during this time. Half of service token initiatives appear to have failed while hybrids had more successful projects than unsuccessful initiatives; project teams may also need time to catch on as investors look for more flexible offerings with rewards from multiple sources (for instance services and bonuses).
Q3 saw ICOs raise USD 1.8 billion, which marked a dramatic decline from Q2, when USD 8.3 billion was raised. 57% raised less than USD 100,000 while only 4 percent managed to list their coins on exchanges (compared with 7 percent in Q2).
About half of all Initial Coin Offerings (ICOs) originate in Europe, where the Securities and Exchange Commission has increased scrutiny on ICOs by mandating that they follow a legal framework and tightening up regulatory oversight of this industry. Recently, Airfox and Paragon Coin companies settled charges with SEC under which their offerings would need to register as securities and reimburse investors who purchased digital tokens improperly offered from these offerings.
Other US authorities are taking part in regulating this sector as well. Maksim Zaslavskiy, a previous institutional investor and self-described entrepreneur has been accused of orchestrating two fake ICOs last year and is facing up to five years in prison as a result of this case. Following its hearing, the Federal Bureau of Investigation stated, ‘we will pursue any individual who tries to profit by exploiting others.’ Additionally, SEC civil charges related to Zaslavskiy are currently being settled following his criminal sentencing in court.
The SEC recently issued “Statement on Digital Asset Securities Issuance and Trading,” outlining how initial coin offerings must comply with existing regulations and how ICOs must register going forward. Opinion is divided as Reddit user u/WantedToGetInvolved comments: “Blockchain firms should move away from these restrictive frameworks to pursue innovation elsewhere; while u/elizabethgiovanni says: “This announcement is great because funds and organizations that use wealthier individuals will only invest if they fully understand their risks!”
Antanas Guoga, Member of European Parliament and serial entrepreneur/investor who is also an advocate of Cryptonews.com recently purchased an ice cream business. Security Token Offerings are more likely to be approved in Europe due to lenient security laws while America may remain off limits due to restrictive and expensive security regulations, according to Guoga.