On Jan 30, Social network giant Facebook announced ban on advertisements for bitcoin and other cryptocurrencies. The company considers such ads to be associated with misleading and deceptive promotional practices. Under Facebook’s new policy, no ads from digital currency exchanges or for promotion of initial coin offerings will be allowed on its platform.
Google, the largest provider of digital advertising on the internet announced the ban on cryptocurrency advertisements and related products from June 2018. Under the new policy, Google will ban advertisements for unregulated financial products such as cryptocurrency, binary options, and financial betting among others. The restricted list includes but not limited to initial coin offerings (ICO), cryptocurrency exchanges, cryptocurrency wallets, and cryptocurrency trading advice. These constraints will be applicable to both Google’s proprietary as well as affiliated ads platform.
Twitter too, joined the movement against cryptocurrency ads and decided to ban ads related to initial coin offerings (ICOs), token sales, cryptocurrency exchanges and wallet services. Under their new policy, the company plans to prohibit advertisement for token sales globally.
Amidst the recent price surge in bitcoins, the number of online crypto ads exploded last year. Most of these ads were deceptive and misleading in nature leading to financial embezzlement and rising cases of deceit and fraud. Fundraising through ICOs drew scepticism from regulators with many start-ups selling their own virtual currencies to fund projects. Online advertising through search engines, social media, and content publishing was the most popular way to market ICOs to new customers.
The united and collaborative effort by these social media giants are keeping the bad guys away by disallowing promotion of deceptive and misleading cryptocurrency ads on their platforms. They are also trying to safeguard the interest of customers by conforming to changing cryptocurrency regulations. Ban on cryptocurrency ads have slumped down on bitcoin prices and weighed heavily on cryptocurrency market capitalization. Bitcoin prices have dropped below $7,000, down by over 50% from its all time high of almost $20,000 in Dec 2017. It continues to follow the declining trend amongst different technologic and economic predictions.
Initial Coin Offering (ICO) is the process of allotting cryptocurrency tokens by the company to raise the predetermined project capital from investors. The concept of funding business idea has evolved radically over the past few years. The Initial Coin Offering, (also called as token crowd-sale) has become a revolutionary way to finance a new business venture.
Inital Coin Offering (ICO) has proved a cash cow for most venture capitalist as well as small and medium investors. It has provided an opportunity to earn huge financial returns through buy and sell of these digital tokens.
How does it differ from Initial Public Offering (IPO)?
Initial public offering refers to the process of raising capital by issuing stocks to the public. The investors are offered with shares of stock based on their contribution. Whereas, ICO raises funds by issuing cryptocurrency tokens to its investors.
In IPO, the shareholder is the partial owner of company proportionate to its equity holding and an active player in company decision making. However, in case of ICO, investors are merely beneficiaries of the profits. Investor holds no ownership in company or any of its assets.
Development and operational cost
The cost of issuing and IPO is huge. Some of the cost includes documentation cost, operational cost, promotional and other accessory cost. ICO is a blockchain technology based digital fund raising which is very inexpensive in nature. The cost of developing and managing digital tokens is extremely less compared to issuing an IPO.
The process of raising IPOs are governed by different laws in different countries. However, the process of raising funds through Initial Coin offering (ICO) is uniform globally. The process is decentralized, still accepted unanimously by the digital community.
IPO and securities market is highly regulated in each country. Every country has a clear set of rules and regulations pertaining to the issuance of IPO, listing and exchange. However, there is complete lack of such regulations in case of raising capital through ICO. Absence of rules and guidelines for ICO operations have attracted incidents of fraud, hacking making it hostile for new investors.
||Initial Coin Offering (ICO)
||Initial Public Offering (IPO)
||Proportionate to equity holding
||Globally uniform and technology driven
||Differs as per laws of each country
|Regulations and Control
||Absent, but evolving
||Clear regulations per country