The initial coin offering (ICO) is a innovative crowdfunding model that enables new businesses to sidestep traditional early seed investment. In 2017, ICOs raised over $4 billion of beginning time capital and massively disrupted conventional finance.Through the ICO fundraising model, new companies can raise capital by issuing crypto tokens on a blockchain — most normally Ethereum — and circulating them to token purchasers in return for making a money related commitment to the task. In July 2017, the Securities and Exchange Commission (SEC) discharged a report which inferred that specific tokens could be delegated securities and subject to control. Almost EVERY SINGLE ICO to date has been an unregistered securities offering, posing under the guise of utility tokens. Also SEC Chairman Jay Clayton said:
“I believe every ICO I’ve seen is a security.”
The “utility token” defence might not work. Chairman Clayton warned against using the phrase utility token. ICOs that violate securities laws could soon confront punishments or graver consequences. Depending on their function, crypto tokens might be classified as Utility tokens or Security tokens.