–ICO needs regulation–
The birth and development of cryptocurrencies are associated with the global financial crisis in 2008.
Bitcoin was born at the end of 2008. At that time, people believed that Bitcoin and its blockchain technology were one of the useful tools to prevent speculation and fraud on derivative products, which were widespread on Wall Street.
However, a decade later, we must question whether the assumption was right. Contrary to the Utopian idea, we must say that many fraudsters are exploiting cryptocurrencies and blockchain technologies for fattening their pockets.
Bitcoin emerged as an alternative to the 2008 global financial crisis out of the assumption that no one could be trusted.
The only method to prevent financial fraud was to create a public ledger. This led to the creation of blockchain and Bitcoin. Now about 3,000 cryptocurrencies are traded worldwide.
The initial coin offering (ICO) market emerged, and blockchain developers and startups could raise funds through crowdfunding.
Crowdfunding is convenient because companies do not need to prepare documents for submitting to banks and other brokers.
Companies also do not need approval from the government in issuing ICOs.
As funding is made through the cyber wallet, no fee or currency conversion fees are necessary. Startups could save initial administrative costs.
But the irony was that startups exploited such loopholes and defrauded money from investors. They are more interested in raising money rather than in developing technology.
According to the Chain Analysis, one out of every 10 ICOs is fraud. It said 30,000 investors fell victims to $225 million cyber crimes.
Fraudsters routinely adopt the Ponzi scheme. They over-advertise blockchain projects, attract investors and raise coin prices until the prices reach a peak. They convert the tokens into cash and fled away, leaving many innocent investors almost penniless.
Many analysts said ‘information asymmetry’ is severe.
A group of inner circle investors can keep track of price movements on a real-time basis. But the other `outsider’ investors seldom know the inside information.
Due to such an extensive information gap, illegal insider trading is prevalent. But there is no way of cracking down on these fraudsters as no regulations exist.
The ICO market needs regulation
Many fraudsters are hell-bent on raking in money by exploiting the no-regulation. They are not interested in financing blockchain startups for technology development, but interested in collecting cash.
The 2018 Global Financial Crisis has given us a lesson: Government regulation is not bad, and regulation is necessary.
Without regulations, gangster-like groups are hell-bent on profiteering and shaking the basic foundation of the market order.
What we need is to introduce rules to protect the market. The market would become mature only when information disclosure rule is strictly enforced.