There is currently a tool to attract funding for startups called Initial Coins Offerings, whose market is 30% higher than the Initial Public Offerings. Invited guests Nidya Remolina and Aurelio Gurrea Martínez spoke about this project that is booming in Latin America at the closure of the series of conferences called “Private Law at ITAM 2018. An Approach to Business.”
It is an honor to participate in this great event organized at @ITAM_mx to speak, together with @NydiaRemolina, about the jca and financial problems of ICOs. Deeply grateful to @CMejan @RRojasVertiz and @andreasolanor for the kind invitation and warm welcome in Mexico!
The panelists explained Initial Coins Offerings basic operation. Blockchain is used to make an initial offer, then startups exchange a token for cryptocurrencies, a form of financing to implement their ideas.
There are different kinds of tokens: utility tokens, which give voting rights or future discounts; payment tokens, cryptocurrencies that can be exchanged for goods or services; and security tokens, which have various definitions, similar to securities.
From an accounting point of view, are they considered a current or non- current asset? Are they in existence or as receivables? Even the token holder can be part of the capital or the liability. This can radically change a company’s financial ratios, which are analyzed many times by the investors.
Risks of Using Initial Coins Offerings
Likewise, they discussed that there are various risks associated with the use of Initial Coins Offerings, for example, the lack of consumer and investor protection or money laundering. The latter occurs especially in networks that allow anonymity that can even be used to finance terrorism. The panelists stressed that this is causing great concern in Europe. Another of the accounting risks is the uncertainty about what would happen if the cryptocurrency bubble were to burst. The guests said that millions of losses could be registered.
Regulations in the World of Cryptocurrencies
They presented the different regulations that exist in the world on cryptocurrencies. For example, regulation in China is limited to prohibition while in Mexico the opposite occurs: overprotecting and reviewing every token issue of any kind. This posture is expensive because it requires many trained personnel at the same time, allowing greater control over cryptocurrencies circulating in the country. In other countries, like the United States, only security tokens are regulated.
They also recalled that in Mexico the head of digital assets is the Central Bank, whereas in other countries that are based on the stock market authorities. Countries that have made the most progress on these issues are Switzerland, Singapore, and the United States. In other countries like Spain, they have only translated what the United States has done, but they have not adapted these ideas to their laws.
The guests promote an intermediate approach by proposing that everyone register. This would allow investigating if necessary. They also pointed out that security tokens need the most regulation and the need to avoid concealing them as utility tokens.