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ICOs and their reputation. The countless scams and bad regulations over the years have really taken a toll on this form of funding. ICO law development and/or adjustments, were not done in time and the reputation damage is here to stay.

In 2017, the cryptocurrency market rapidly expanded. New investors were entering the market while others keep trading only during important price fluctuations. At the same time, Initial Coin Offerings grew as an option for new businesses to gather funds and start their blockchain related projects. But, can Initial Coin Offerings (ICOs) face legal problems?

The law firm Polsinelli LLP has published a study called “Cryptocurrency Class Action Lawsuits: A New Frontier,” where they explain that ICOs will suffer from different litigation proceedings

Polsinelli LLP and a group of researchers claim that lawsuits regarding ICO projects will increase in the future. The paper has been written by three shareholders from the company Michael S Foster, Mark A Olthoff and Richard B Levin.

The statement reads:

“Both Ether and Bitcoin are used by investors to buy into Initial Coin Offering (“ICO”) opportunities, which are similar to Initial Public Offerings (“IPOs”) and were an extremely popular way of raising capital in exchange for “crypto tokens” in 2017. These ICOs, however, have spurred recent class action lawsuits.”

Not a single ICO law was implemented in time

According to the company, this is just the beginning of class action lawsuits related to Blockchain companies that participated in ICOs. It is possible that in the future, other issuers of tokens will face class action lawsuits.

Polsinelli specialists advised not to invest in ICOs unless the token offering is conducted in compliance with applicable state and federal laws. They also advised those who are thinking about issuing a token to proceed with caution.

One of the main problems that ICO faced is that their business model was often sold in a manner that may be contrary to the state and federal securities laws. Therefore a more timely and more clear ICO law would have done wonders.

They explain in the paper:

“ICOs, therefore, may be fodder for lawsuits by investors alleging harm by being taken advantage of by the founders and the lack of regulatory oversight.”

2018 saw several countries start to see cryptocurrency companies organizing themselves to regulate the market. For example, in Japan, a group of sixteen cryptocurrency exchanges have decided to create a self-regulatory body. The intention is to safeguard investors from the lack of a regulatory framework. This could have all been changed with a simple ICO law update.

These cryptocurrency exchanges have decided to take this decision after Coincheck’s Hack. Coincheck, the Japanese cryptocurrency exchange, that has been hacked for $500 million dollars.

Countless other attacks happened even during the rest of 2018 when the bear market slowly took over. Not a single ICO law was implemented to make sure that investors cannot fall victims to scams so easily.

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