What is crypto currency ICO

Initial Coin Offering (ICO), raising capital with cryptocurrencies

The ICO for start-ups is like a crowdfunding campaign in which investors provide virtual money to help companies pre-finance their service or product. This money can flow to blockchain projects as well as to companies from more traditional industries.

That with the English terms Initial token offering (ITO) or Initial Coin Offering (ICO) can be compared in a certain way with an IPO, which, however, is carried out on the blockchain. The ICO is being launched by a start-up that has previously calculated its capital requirements and created a "white paper" in which its business model is described. Investors can then fund this company through payments in cryptocurrencies such as Bitcoin or Ether.

In return for their capital, investors receive tokens. These can fulfill various functions. They can serve as currency or as a right to access a platform on which one can purchase the start-up's products or services. Depending on the type of tokens, these can also give the investor the right to dividends or a voting right in the company.

This approach has several advantages. On the one hand, it enables a start-up to raise large sums of capital in a short time and at low cost. On the other hand, it ensures a distribution of access rights. However, the ICO also brings with it some risks. The speed and simplicity of the process leads many young companies to raise funds for future projects for which there is not even a prototype. Thus, the investor has hardly any guarantees and no claim to the project. In addition, the risk of fraud is quite high, as there is no regulation for the tokens and they are sometimes issued by unidentified people.

With regard to Swiss legislation, the Swiss Financial Market Supervisory Authority (FINMA) published guidelines in February 2018 in which it explains how it deals with subordination requests in the area of ​​ICO.

Source: The site was checked by a Swiss law firm in June 2018.