Beyond the ICO Part 2: Regulation Breeds Specialization

There's no doubt that the shape of ICOs is changing-but what role will regulators play in the future development of the ICO model?

As market participants begin to adapt to exit scams, a set of de facto requirements have emerged that ICOs must follow to succeed-rules that government regulators have begun to adopt while a legal scaffold is quickly constructed around the out-of-control ICO industry.

In this three-part series, CryptoSlate will assess the current state of the ICO ecosystem, analyze the regulatory shift that is making the "Traditional" ICO model untenable and take a look beyond the ICO at the future of a decentralized capital generation.

The ICO is Dead. Long Live the ICO. The hand that will drive the final nail into the coffin of the traditional ICO model is directly attached to the arm of regulation.

Upcoming regulatory changes to the definition of what constitutes a security will see scores of the ICO ecosystem fall to the tyranny of financial watchdogs-which is, in some cases, necessary.

The core appeal of the ICO model, which democratizes access to growth capital, is how it opens up participation in the market of ideas to anyone, anywhere-free from restrictions such as the U.S. SEC's limitation on pre-IPO sales to "Accredited investors." A small oversight is arguably necessary to safeguard the interests of ICO investors.

ICO regulation hinges on the separation of the sale of utility tokens, which provide investors with access to future products or services, and security tokens, which represent ownership of an asset, with functionally equivalent to equity or debt.

"I believe every ICO I've seen is a security".

While the SEC has recently softened its stance on ICOs, it's clear that the classification and regulation of ICOs are soon to change.

In part three of CryptoSlate's "Beyond the ICO" series, we'll take a look at the future of ICOs and examine what the future may hold for regulated blockchain-based crowdfunding.