OECD: ICOs Have Financing Benefits But Aren't a Mainstream Option
The Organization for Economic Cooperation and Development thinks ICOs may be a beneficial fundraising tool, but not yet for "mainstream" firms.
The Organization for Economic Cooperation and Development (OECD) thinks initial coin offerings (ICOs) may become a useful financing tool for small and medium-sized businesses (SMEs) – but the space is not yet mature or regulated enough for the "mainstream."
The report, published Tuesday by the international economic organization, provides a broad overview of ICOs and different token distribution methods, including airdrops, and examines how tokens built on top of distributed ledgers (DLT) may be used to raise funding for these smaller companies.
The report notes that it does not explore token taxonomy or regulatory efforts, given that such efforts are ongoing. Further, the authors say the report "is based on the theoretical discourse of token offering and is not intended as a practical ICO guide."
While ICOs may be helpful in raising funds, the general immaturity of the space means it may be difficult to properly assess the value of tokens for companies, it goes on. This in turn could impact how much funding firms would be able to raise.
The report adds:
Further, the OECD argues that ongoing regulatory uncertainties mean companies may not want to trust the use of tokens in fundraising.
Even beyond a lack of clarity on how regulators in different jurisdiction might treat cryptocurrencies and tokens, the fact that ICOs represent "early stage" financing means that there is an added risk to investors, particularly those who may not understand what exactly they would be purchasing in a token sale.
As a result, the report says, any potential for ICOs to act as "a mainstream financing option" is limited,
"It therefore seems inappropriate to consider ICOs as a potential 'mainstream' financing mechanism for SMEs whose projects are not enabled by DLTs and which would not benefit from network effects," it notes.
OECD image via Shutterstock
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2024, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.