In 2018, ICOs, or initial coin offerings, were the hot new thing in startup fundraising. A company could raise money by selling you a little bit of value or equity in the form of a digital coin, similar to bitcoin but specific to that company. ICOs raised about $22 billion, or so we think. It's hard to know because the practice has been unregulated. A lot of ICOs turned out to be scams. The Securities and Exchange Commission started fining celebrities like Floyd Mayweather and DJ Khaled over sketchy paid promotions for ICOs. It got weird, and now it's regulation time. That means future ICOs and their digital coins might start to look a lot more like good old-fashioned stock, except traded on the blockchain. And that has big ramifications for Wall Street. Molly Wood talked with Kristen Howell, a partner with the law firm Fox Rothschild who helps companies create ICOs. The following is an edited transcript of their conversation.
Kristen Howell: The SEC started to really crack down on this last year largely, I think, because of massive fraud and theft. With this action, people have had to shift their approach to this ICO 2.0, also called a security token offering, where they split this token idea into two things. They issue stock as part one of this, and then part two is they maybe, they don't have to, go have this token that does everything but stock. So on the first part of that, it's issuing stock in blockchain form.