Initial Coin Offerings (ICOs) became popular back in 2017 when the crypto market was expanding and reaching new highs. However, a large number of them were just fraud or irregular schemes created to steal users’ funds.
This is why there is now a new model to offer coins to the market called Initial Exchange Offering (IEO). However, several industry critics have provided their opinion on the matter.
Are IEOs Better Than ICOs?
Initial Exchange Offerings became an alternative to Initial Coin Offerings in which a virtual currency exchange works as an underwriter that operates the sale of the tokens. Investors can purchase the tokens knowing that the platform has already performed a basic analysis on the viability of this project.
There have been several IEOs released to the market in the last months, including BitTorrent Token (BTT) on Binance Launchpad and TOP Network (TOP) on Huobi Prime. According to data provided by CoinSchedule.com, $180 has been raised in 23 different IEOs. Most of them took palce in February, as Bloomberg reports.
The whole cryptocurrency market continues operating without a clear regulatory framework. Initial Coin Offerings are also not regulated. Initial Exchange Offerings have no clear status as well. According to Zach Fallon, a securities lawyer that worked at the U.S. Securities and Exchange Commission (SEC), the new model is even worse then ICOs.
Furthermore, Jeff Dorman, partner and portfolio manager at Arca Funds, said that this is at odds with the decentralized ethods of virtual currencies. In addition to it, exchanges are using IEOs as a way to push sales of their own native tokens.
Both Binance Coin (BNB) and Huobi Token (HT) are used on their exchanges to purchase the coins offered by different projects. It is possible to see how HT and BNB have experienced large volatility before and after IEOs.
Fallon explained that IEOs could make the model even more challenging and problematic for regulators around the world. Indeed, they can be considered securities with higher probability than ICOs.
Biannce launched several IEOs to the market and received a lot of attention from investors and users. Another IEO launched by the exchange was Fetch.AI.