ICOs: The risks investors need to weigh up

Initial coin offerings let issuers raise money from the public without dealing with regulators and banks. But this latest cryprocurrency trend raises red flags.

Instead of filing papers for an initial public offering with a securities regulator and then selling shares, blockchain companies are raising money selling digital tokens. That’s what Filecoin did in early August when it raised $252 million in just over half an hour.

Using the technology that underpins bitcoin, these providers of indelible digital ledgers are finding different ways to come to market. By raising funds directly from public markets to develop technologies and pay for storage, issuers of initial coin offerings not IPOs but ICOs can bypass private equity funds and investment banks. As such, they could radically disrupt capital markets. 

That said,...

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