The ICO. It has been a fantastic tool, mobilising venture capital globally and enabling investment in projects by removing barriers that remain in the traditional financial sector. Great business ideas can generate investment funds to get a project going, raising millions in a matter of weeks, days, or even hours.

Having said that, it has to be acknowledged; the ICO concept has its flaws. Some pretty big ones, in fact. The risks and pitfalls of this innovative investment tool become readily apparent with just a little consideration. Because an ICO can be created for pretty much any reason, with a digital address that can receive funds from anyone, even without knowing the sender or receiver’s identity, you just know there are going to be malicious actors who salivate at the opportunity to take advantage of these attributes in manipulative, harmful, and selfish ways.

ICO’s are risky business

Firstly, it is actually quite surprisingly easy to generate unjustifiably large quantities of money with just a bit of convincing. In some cases, millions have been raised in a few hours, with little but a nice idea in the works. Secondly, it is also very easy to simply take off with the money once it is raised; folding the business, shutting off the websites, and walking away from a project, along with the millions of dollars invested in it. The words “scam” and “ICO” have often been seen in close proximity to each other in news articles over the past year or so.

You need only browse around for a few moments to find stories of ponzi schemes like Onecoin, where 18 members of the team ended up being arrested. Dig around for a few seconds and you can find incidents of straight-up plagiarism, like the Droplex carbon-copy of QRL’s white-paper. In some cases, like the Pincoin and iFan ICO’s, the team ran off with investors’ money, shutting down operations and making off like bandits. These kinds of incidents are, sadly, not rare, and have happened time and time again since the inception of the ICO.

Separating the wheat from the chaff

That’s not to say that there aren’t some fantastic ideas out there that are truly taking advantage of the venture capital that is generated to develop and market what could turn out to be excellent projects. Energi Mine, for example, having raised considerable sums of money via a successful ICO, has a working project in ETK with genuine functionality as well as practical and beneficial applications. It’s a project with genuine partnerships, a healthy business model, and true utility.

So what’s to separate a genuine project with real value from the latest scam that promises 300% returns and lambos, but under-delivers when it comes time to actually getting down to work?

This is where the SEC, we hope, can step in and make a positive difference. The SEC — the U.S. Securities and Exchange Commission — has a great deal of power in the future of ICO’s, as the American market is so influential globally. The SEC has been working around the issue of ICO’s and cryptocurrency, warning investors of the perils of investing in ICO’s while getting a handle on the new technology and all of its legal implications. In upcoming hearings, if the SEC can bring forth some clear regulation and an ability to separate the wheat from the chaff, projects with real merit can finally start receiving the recognition and support they need to innovate and grow.

Most recently, the SEC published a statement regarding its desire to streamline the ETF approval process. ETF’s — or exchange-traded funds — allow investors to own shares in an underlying product, whether it be gold, oil, or in the near future, cryptocurrencies. This would allow hedge funds and large-scale investment portfolios, say pension funds for example, to have shares with digital currencies as the underlying asset included in an investment portfolio. Importantly, this hinges on the necessity of those underlying assets to provide full disclosure and transparency in their daily business, ensuring a much higher level of scrutiny for potential investors and an ability to weed out bad investments.

If there is anything that holds back growth in any kind of economic activity, it is uncertainty. With clearer expectations along with better defined rules, we can expect to see certain less-than-legitimate projects wither on the vine while projects with good fundamentals, like Energi Mine’s ETK, might finally get a chance to shine.

Author: Darren Klein.

For more information about EnergiToken and its energy-saving reward scheme, please visit www.energitoken.com, follow on Twitter at @EnergiMine or join the Energi Mine Telegram group.