Many cryptocurrency critics have weighed the potential drawbacks of the so-called initial exchange offers (IEO).
IEO offers an alternative token offer model, in which crypto-exchange acts as a form of underwriter, managing sales and supposedly testing both the projects themselves and potential investors.
The phenomenon of IEO seems to have gained momentum against the background of the shrinking ICO market, which has absorbed the negative impact of regulatory measures and bear crypto ratings.
Bloomberg quotes the CoinSchedule.com cryptocurrency tracker, whose data reportedly indicates that about $ 180 million were collected in IEO 23, most of which occur since February.
Nevertheless, some critics argue that the regulatory status of IEO is no less clear – and even less promising in the future – than their predecessors, the ICO. Zach Fallon is a securities lawyer who reportedly previously worked on ICO issues at the US Securities and Exchange Commission, Bloomberg said that the new model "will take everything from ICO and make it even worse."
Jeff Dorman, partner and portfolio manager at Arca Funds from Los Angeles, pointed to the paradox of introducing intermediaries into a space that values decentralization:
“The irony, of course, is that it is directly at odds with the decentralized ethos built into the cryptocurrency, but it’s convenient to ignore while it is working.”
Moreover, crypto exchanges allegedly use IEO as a pretext to stimulate sales and use their own tokens, either forcing IEO issuers to raise funds using their exchange token, or requiring IEO traders to have large balances of their own token to participate in sales. ,
Fallon told Bloomberg that this practice could make the model even more problematic for regulators and increase the likelihood of their recognition by securities. He also noted the role of broker-dealers in offers.
As reported, the IEO model was headed by Binance, whose Launchpad tokens sales platform held a loud sale of tokens for Tron-based BitTorrent (BTT) token in January of this year, followed by another IEO for AI and the Fetch.AI smart contract project February.
In mid-March, the Bittrex crypto exchanger canceled its first sale of IEO tokens, which it planned to place with its partner in Malta, just two days after its announcement. Later in early April, he held another introductory event for IEO.