What is the difference between an ICO and an IPO
ICOs (Initial Coin Offerings) are very similar in nature to IPOs (Initial Public Offerings). Like IPOs, a stake of the startup or company is sold to raise money for the entity’s operations during an ICO operation. However, while IPOs deal with regulated investors via stockbrokers and the like, ICOs deal with supporters that are keen to invest in a new project much like a crowdfunding event which is announced to raise interest in a new “Unregulated Investment. But ICOs differ from crowdfunding in that the backers of an ICO are motivated by a prospective return in their investments, while the funds raised in Crowdfunding campaign are basically donations and other forms of raising by charity events and or raising money by small private groups to fund Charity projects. For these reasons, ICOs are referred to as crowdsales.
ICO offerings also retain at least three major differences from IPOs. First, ICOs are decentralized, which means that there is no single authority governing them. Secondly, ICOs are largely unregulated, meaning that government organizations like the U.S. Securities and Exchange Commission (SEC) have no authority over them. Finally, as a result of decentralization and a lack of regulation, ICOs are much freer in terms of structure than IPOs and as a result generally more flexible in the how, why, and what the ICO is actually offering to its investors.
Unlike other fundraising methods such as an initial public offering (IPO) or even venture capital, the investor doesn’t get an equity stake in the company. If you buy shares in a public firm, for example, you own a small slice of it. Instead, the promise of an ICO is that the coins or token which you purchase can at some point be used on a product or service that is eventually created. But there is also hope that the digital token will appreciate in value itself which then opens up the option of trading them for a profit.
Is an ICO a Legal Entity?
The legal state of ICO is mostly undefined. Ideally, the token is sold not as a financial “asset” but as a “digital product” like many other things. This is why ICO is often called “crowd sale”. In most jurisdiction throughout the World, the funding with an ICO is not regulated, which makes it extremely easy and paperless to manage and does not usually need a lawyer to manage or understand.