Digital currency sales take off
- By Zimpapers Syndication |
- 04 May, 2025 |
- 0
A small, but rapidly growing number of digital technology start-ups is raising cash by creating and selling their own currencies in offerings that bypass banks or venture capital firms as intermediaries and are outside the reach of financial regulators.
Investors are being drawn in on hopes that such "initial coin offerings" will match or exceed the performance of the first digital currency, bitcoin.
For the sellers, the appeal of selling their own currencies, or tokens, to raise cash is enormous. There is no paperwork as would be required for a public securities sale.
But the lack of regulatory oversight is raising red flags among some market experts and financial technology lawyers, some of whom even question the legality of the tokens.
Joe Zhou says he needed just 58 seconds to sell enough tokens to meet the roughly $5.5 million fund-raising target for FirstBlood, the online gaming website he co-founded.
"We had expected the sale to run for a month and we even gave the people who participated early-bird discounts because we were not sure how it would go," Zhou said.
The tokens sold by FirstBlood, like those sold by other companies, are the currency required to play games on the platform, for instance, or claim rewards for referrals.
For FirstBlood, a distinct advantage to having its own currency was to give gamers complete control over their funds, with no intermediaries such as banks involved, and with encryption features protecting against hacks.
The transactions are accounted for using blockchain, a ledger of transactions that first emerged as the software underpinning bitcoin and is maintained by a network of computers on the internet. Blockchain has gained traction on both Wall Street and Main Street, encouraged by the technology's ability to record and track the movement of assets.
Companies raising capital through the sale of tokens are all operating in the blockchain space.
The market is still tiny, but it has been growing at breakneck pace. About $225 million has been raised so far this year in 40 initial coin offerings (ICOs), compared with just $9.8 million in 2015, data from crypto-currency research firm Smith + Crown showed.
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