ICO refers to the initial coin offering or initial currency offering. When funding is done with the help of cryptocurrencies, it comes under initial coin offering. People can use ICO for raising funds for new cryptocurrency offerings. It helps in data protection by giving advice and guidance. Moreover, ICO development companies promote good practice in securing personal data. Those entrepreneurs who want to launch a new cryptocurrency can go for ICO (initial coin offering) with the help of ICO development services provided by these companies. There is no restriction of government on anyone related to the launching of ICO.
Risks and liability involved in raising a fund with ICO
As bit coin and blockchain technology has become a source of attraction when it comes to investment. But there are various financial benefits and risks involved in raising a fund with an ICO. This type of investment can help the people to raise money quickly but it can result in loss of money as well. So people must make sure about the risks when they go for investing in an ICO. Here are some most common risks which everyone must go through to have a safe and secure investment:
Unregulated ICO: one of the biggest risks related to ICO is that it is unregulated. Everyone is investing ICOs at a very quick pace but they do not know that this can have more chances of being unregulated in the upcoming future. There are chances that ICOs can lose their value or sold off in the market. Thus, if anyone is looking forward to raising funds from ICOs, just understand this thing that ICO regulation is not known.
Tax-related issues: apart from non-regulation issues, numerous tax-related issues can easily arise while raising funds from initial coin offerings. This is because ICO tokens can be classified as property, debt, prepaid services, prepaid goods, equity, and others. Each ICO can be categorized as per the need when it comes to tax classification. So always make sure about the holding of ICO token correctly. Commonly, anyone can get tax-related issues with ICO token as the risk related to these tokens are worth taking.
Lack of security: ICO investments are completely dependent on technology and this can be easily affected by cyberattacks. Cybercriminals always keep on trying to find out different ways to hack the systems so that they can steal the cryptocurrency most easily. This creates a greater chance of cryptocurrency being stolen. Moreover, with the help of phishing scams, hackers can steal your identity also.
Fraud: investing in an ICO also has the chances of being fraudulent cases. This involves stolen individual identity by cyber-attacks and it becomes easier with initial coin offering. There are more chances of occurring fraud internationally and thus it increases more risks as compared to frauds happening inside the united states.
Issues related to ICO tokens: as ICO investment can be done with the help of ICO tokens and these tokens are based on smart contracts. Ethereum is one such example of ICO token and hence has more chances of being theft, stolen or lost. Any hacker can easily hack your online or offline wallet and can make you fall in trouble. Moreover, there are risks related to selling of these tokens as there is no surety of ICO tokens to be sold later on. This is just a game that needs to be played very carefully and intelligently. Make sure to know everything before investing and raising funds with an ICO.
Unclassified and instability: investing in ICO is highly unstable and unclassified. It is also unknown that whether raising funds through an ICO is legal or not. Some people classify cryptocurrency as property, some as debts while others as equity and securities. But this is still a topic of debate and have chances of being illegal. Apart from this, its structure is not properly defined. ICO tokens can be sold at different prices in the market and investors can sell them at different rates. Thus this can be a risky step to invest in initial currency offerings.
Regulatory frameworks: investors might sometimes ignore the regulatory framework and do not examine the regulatory policies of the country from which they are launching their ICOs. This can result in compliance with the policies and thus suffers the reliability of the company.
Poor marketing and social activity: even a good project idea can fail due to a lack of proper marketing and social activity. This is very important to inform customers and investors about the project idea. Marketing helps in targeting the required customers and attracting the audience by understanding their preferences. But the lack of marketing activities can result in a lack of customers and an audience for investment.
Investment period: The investment period of the project can bring a lot of turn and twists and thus the ICO launching services providing companies can help you to cope up with such situations. Time plays a vital role while raising funds through an ICO. A long investment period can have a great impact on the token price. Moreover, no change in the project idea for a long time can also create numerous issues for an investor.
