Cryptocurrency Ethereum

ICOs are a “ticking time-bomb”, former Ethereum CEO warns

Initial coin offerings have been one of the main drivers of ethereum’s meteoric rise this year, but the ICO boom has prompted some experts to voice concerns over the potential negative effect of these fundraisers. The latest to join that camp is the co-founder and former CEO of the Ethereum Foundation Charles Hoskinson. In a recent interview with Bloomberg Hoskinson described the current ICO market as a “ticking time-bomb”.

“People say ICOs are great for ethereum because, look at the price, but it’s a ticking time-bomb,” Hoskinson said, as quoted by Bloomberg. “There’s an over-tokenization of things as companies are issuing tokens when the same tasks can be achieved with existing blockchains. People are blinded by fast and easy money,” he added.
This year blockchain startups have raised over $1.2 billion in digital coin sales, with around $600 million raised in the last month alone, according to a July report from Autonomous NEXT. This is a more than six-fold increase from the total amount of funds raised last year.

The interest in ICOs have had an undeniable positive effect on cryptocurrency prices and especially on the price of ether, but Hoskinson is among a growing group of blockchain observers voicing concerns about the rapid surge in digital coin crowdsales. He believes that regulation is the biggest risk to the sector, as the US Securities and Exchange Commission will eventually say that the digital coins sold in ICOs are securities.

The current state of the market allows startups raising money through ICOs to skip the safeguards required in traditional securities sales, like making sure they’re dealing with accredited investors and verifying the source of funds. This could lead to lawsuits in the future, as digital coin buyers can sue the issuer claiming they didn’t know the risks of buying those assets, Hoskinson told Bloomberg.

While Hoskinson, who left the ethereum project three year ago and now runs his own technology research firm called IOHK, expects the ICO bubble to burst, he believes that cryptocurrencies will remain an avenue for companies to raise money, but the sales will be conducted in a regulate and more constrained environment.
“Regardless of regulation ICOs are here to stay,” he opined. “After it collapses they’re going to pick up the pieces and say how do we do things differently.”

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