Risks and Benefits of Initial Coin Offerings: Evidence from impak Finance, a Regulated ICO^*

Abstract

This study provides a better understanding of the business and the regulated environment surrounding initial coin offerings (ICOs). An ICO is a call for funding to raise funds through a blockchain, where cryptoassets are issued. Key stakeholders involved are the firms launching ICOs, the investors, and the financial regulators. We conducted a case study of a firm that launched an ICO, impak Finance, the first regulated ICO in Canada. Based on the interviews of key respondents, we developed a framework identifying the main risks and benefits for firms to performing an ICO, showing differences between unregulated and regulated ICOs. Our study makes a number of research and practical contributions. First, we document the case of the first regulated ICO in Canada. The interviews conducted provided access to privileged insider information. Second, very few studies have been conducted on the impact of blockchains as a financing vehicle. ICOs using blockchains may be disruptive not only from a technology standpoint but also from a financial standpoint. While the possible applications of blockchains are unknown to us to date, we do know that blockchains have the potential to challenge the traditional financial system monitored by financial regulators. Last, the study identifies, through a framework, the risks and benefits of performing an ICO in an unregulated versus a regulated context, which has practical implications for firms operating in the fintech space. We trust that this framework will be useful for firms using ICOs, for investors, and for financial regulators.

The Impact of Regional and Segmental Factors on the Benefits and Risks of Venture Capital Financing

“…One of the most significant benefits of venture capital financing is access to more capital than is typically available through traditional sources of financing, such as bank loans. (Boulianne and Fortin, 2020). This capital allows businesses to grow and expand rapidly, which can lead to greater market share and subsequent competitive advantage.…”

FinTech és blockklánc alapú megoldások alkalmazási lehetőségei a zöld pénzügyekben

“…Amellett, hogy az ICO lehetőséget nyújt induló vállalatok számára a közvetítő felek nélküli forrásbevonásra és a projekteknek nem kell olyan szigorú előírásokat teljesíteniük, mint a hagyományos tőkebevonási lehetőségek esetében, fontos felhívni a figyelmet az esetleges kockázatokra. Az ICO-k kapcsán ugyanis nem ritka a csalás, amikor is a vállalat eltűnik egy adott pénzösszeg összegyűjtése után (Boulianne & Fortin, 2020). Fisch (2019) szerint az ilyen esetek mutatnak rá arra, hogy a szabályozóknak jobban kellene kontrollálniuk az ún.…”

New Ways of Working through Emerging Technologies: A Meta-Synthesis of the Adoption of Blockchain in the Accountancy Domain

“…Major financial crises, such as the global economic crisis of 2007-2008 that started in the U.S. with the failure of high-risk (subprime) mortgage loans, have generated a distrust of financial institutions around the world [40]. In light of these problems and inefficiencies, the authors of the studies selected for this meta-synthesis identify a process suggesting how blockchain, smart contracts, the Internet of Things (IoT), and machine learning (ML) can help safeguard equity investments in capital markets by improving the reliability of financial statements and improving the quality and outcomes of the audit process [46].…”

“…Digitization has opened the door to new competitors in addition to those that naturally and historically preside over some of the accounting profession's own activities and are, in fact, now perceived as real threats [43]. Businesses' service innovations and client management are still little evolved, demonstrating that digital orientation is still characteristic of only a few [40]. It is necessary to create the conditions for digitization and artificial intelligence to create real opportunities for accountants and to enable accountants to seize those opportunities.…”

“…The blockchain would enable the adoption of common standard guiding principles, the reduction of total reporting costs, and the description of the relevance of issues with a certain reliability and especially comparability of information. Indeed, blockchain technology in accounting fosters insight into the strategic goals of the organization; its ability to generate and maintain value in the short, medium, and long term; and the capital and relationships on which it depends [40].…”