Every day numerous transactions take place across the world, but technological innovations such as cryptocurrency and blockchains may change how consumers and companies conduct business in the future.
Young professionals learned more about the topic during a panel discussion Aug. 2 sponsored by Conexx: America Israel Business Connector, at stable|kernel’s new location, The Willoughby. The Conexx Young Professionals event sponsored by the Consulate General of Israel and Capstone Financial explained cryptocurrency, ICOs (initial coin offerings) and the regulatory framework around them.
Invented by Satoshi Nakamoto, cryptocurrency is a digital currency that companies and people use to monitor a network of online payments, balances and transactions. Differing from cryptocurrency, blockchains are a series of verified digital transactions for which advanced computers find mathematical solutions. Once a transaction is proven, it creates a block or a series of blocks.
One of the ways cryptocurrency is changing the way people and/or companies do business is through ICOs or a digital asset of blockchains. The coins are usually used to fund new projects that have yet to be created and are marketed through social media. The two types of tokens used in such ventures include security and utility.
“Over $6 billion dollars has been invested in ICOs this year, which is an amazing amount and one of the reasons the SEC [Securities and Exchange Commission] is interested in ICOs; that and a large occurrence of fraud,” said guest panelist Colin Hill, principal of Hill Innovative Law.
To help monitor the ICOs, the SEC invented the Howey test, which verifies that people are invested in a common enterprise, there is a reasonable expectation that the investment becomes profitable, and the investment is based on the efforts of others and not the investor.
Atlanta-based startup, game developer and movie studio Gramarye Media is one many companies that received funding through ICOs. “We decided that the only way to get this project running and off the ground is to invest in ICOs,” said Arthur Stepanyan, the company’s executive director, blockchain.
In recent years many financial markets have adopted ICOs. For example, in 2017, 10 Israeli startups raised a total of $480 million through ICOs, and Israeli startup Bancor raised close to $150 million through an ICO in June of 2017, said Alexandra Tregre, stable|kernel business development and marketing manager.
Yet ICOs also pose a threat and are extremely disruptive to traditional financial markets. Cryptocurrency consultant Ethan Merbaum said, “It’s a very strange and confusing landscape for a lot of people who have great ideas, but it seems now for every idea you have to have a lawyer and connections. But by allowing individuals to start with ICOs you know up front the amount of capital you need, … what you are planning to get, what you are going to do, and instead of having two to three board members that say they like or don’t like the idea, you are bringing your idea to the world, and, sink or swim, it’s based on what the people want.”