When Initial Coin Offering (ICO) was unveiled, blockchain startups and fintech companies were rushing to make use of the new crowdsourcing technique due to its simplicity in raising capital for projects. 2017 specifically was a very successful year for ICOs and the world witnessed some of the best ICOs to date. The total amount of funds that were raised in 2017 was close to $6 billion up from about $200 million raised in 2016.

However, not all the projects that used ICOs turned out to be successful and some also turned to be scams since ICOs are not regulated in most parts of the world. At the moment, only a couple of countries like Singapore, France, and Germany have come up with ICOs regulations to make them safe for investors.

Having said that, ICOs are still a viable option for raising capital for your blockchain project. In this article, we shall review some of the successful blockchain projects that started by raising capital through ICOs. You can still leverage ICOs and pull out such successful projects amidst the regulatory issues facing ICOs.

However, you will have to put more effort into the project development by putting together the best team for the job. Again you will want to ensure that you comply with any regulatory laws in the region where you investors come from to avoid court cases like those that hit BLOCK.ONE and Telegram ICOs.

The list below was developed taking into account the Returns on Investment (ROI) for each of the projects and also by how much the blockchain project has been adopted across the globe.

10 most successful ICOs

  1. Ethereum

Ethereum ICO was conducted in August 2014, making it the second blockchain project to leverage ICO to raise capital, after Mastercoin ICO conducted in July 2013. At the end of the ICO, Ethereum raised a staggering $16,000,000.

Today, Ethereum is a force to reckon with in the cryptocurrency and blockchain world. The blockchain network completely revolutionized the world of cryptocurrency by enabling blockchain networks to do more than just offering payment services. Ethereum introduced smart contracts which have been the cornerstone of every other blockchain use case.

Ethereum was developed as an open-source distributed ledger platform that enabled its users to create and deploy decentralized applications (Dapps) and also apply and use smart contracts. It introduced the ERC-20 token standard that offered other blockchain developers a basis for creating their crypto coins; most altcoins use the ERC-20 standard to create their tokens.

Ethereum is by far one of the most successive blockchain network second to Bitcoin. Currently, the ETH, which is Ethereum crypto coin, trades at $207.75 USD. Towards the end of 2017 and beginning of 2018, ETH was trading at over $1200 USD.

  1. IOTA

IOTA ICO was conducted towards the end of 2015 and was one of the first blockchain projects to use ICO to raise capital. A single IOTA token was going for 0.00000133 BTC, which translated to less than $0.001 at the time. The ICO was able to raise $590,000.

IOTA blockchain holds lots of prospective use cases since it merged Internet of things (IoT) technology and blockchain technology. The project developers envisioned a future where different ‘things’ using the internet would be able to communicate with each other using blockchain technology.

IOTA stands out as the only blockchain technology that doesn’t rely on blockchain fully for its transactions. It uses another system known as The Tangle to verify transactions as they are being made. This way IOTA has been able to dodge the scalability problem affecting most blockchain networks.

IOTA has been adopted across various industries across the world. For example, Taipei signed an agreement with IOTA Foundation for its Taipei smart city project. Also, a Netherlands company called Elaadnl dealing with smart charging has succeeded in developing the first working prototype using IOTA. The list keeps on growing as more and more industries fall to IOTA’s technology.

At the moment, one IOTA token is trading at 0.00002073 BTC.

  1. DigixDAO

The DigixDAO ICO was the first crowd sale to be conducted on Ethereum. It was conducted in March 2016 and it raised $5.5 million.

DigixDAO is one of the main Decentralized Autonomous Organizations (DAOs) developed on the Ethereum network.  DAOs are normally new business structures that have no bosses but rather all decision affecting the networks are made through proposals and voting.

One of the main features of the DigixDAO blockchain is that it has two crypto coins; the DGD and DGX.

The DGD tokens were the ones that were issued during the ICO. During the ICO, a single DGD token was going for $4.2000 USD.

Contrary to most other ICOs, buyers of DAO tokens hold the rights to vote in the proposals submitted to the DAO.

The main objective of DigixDAO is to create a stable cryptocurrency that is backed by real gold bars. According to the DigixDAO, the token that is backed by the gold bars is the DGX. The gold is stored in a custodian vault in Singapore that can hold up to 30 tons of gold. The gold goes through a Proof of Asset protocol, where its existence is verified through the Ethereum blockchain.

Currently, the DGD token is going for $39.98 USD.

  1. NXT

The official announcement of NXT ICO was made in Sep 2013 on BitcoinTalk forum.

The NXT blockchain is viewed as a descendant of the Bitcoin blockchain and it was developed to solve some of the issues affecting Bitcoin. Some of the issues that NXT promised to fix was shifting the mining algorithm to proof-of-stake and also resolve the issue of bloated blockchain.

The ICO which was conducted on the BitcoinTalk forum platform raised $16,800 in Bitcoin. At the time of the ICO, the value of NXT token was $0.0000168. However, at the moment the token’s value is above $0.01.

Besides the fact that the NXT is tradable on most crypto exchanges, the NXT blockchain is now fully operational and blockchain developers use it to develop decentralized applications. It also has an asset exchange platform, the Nxt Asset Exchange, and a messaging system.

  1. NEO

NEO ICO was conducted in September 2016 and it raised $5,050,000. During the ICO, a single NEO token was going for $0.032.

NEO blockchain is often referred to as the Chinese version of Ethereum. It offers smart contracts and on top of that provides digitized assets, identification decentralized commerce. The developers saw a future where blockchain would be used to represent legal proof-of-ownership for the broader society rather than the cryptocurrency community alone.

Today, NEO is traded on most crypto exchanges and currently trades at over $9.87. Towards the end of 2017 and early 2018, NEO was trading at over $120.

  1. Stratis

The Stratis ICO was conducted from August 2016 to January 2018. It was raised $610,000 by selling a single STRAT token for $0.007.

Stratis blockchain is a project that was developed to offer end-to-end solutions for the development, testing and deployment of Blockchain-based applications for the businesses worldwide. Its main aim was to make it easy for blockchain developers to develop blockchain networks that address whatever problem that is faced in the business sector.

The project has become quite a success since it ended up with a platform that is fully compatible with the C# and .NET programming languages, which are common among coders. One of its best use cases was when Microsoft added it as a Blockchain-as-a-service (BaaS) to its Azure cloud service. Stratis has become a darling for enterprises that use Microsoft products and looking to incorporate blockchain technology.

Currently, the Stratis (STRAT) goes for over $0.30. It reached its all-time high at the start of 2018 when it was going for $21.21.

  1. Ark

Ark ICO was conducted from November to December 2016 raising $22,000,000 USD. During the ICO, a single ARK was valued at $0.1 USD.

The Ark blockchain project was developed to create a platform that could link different blockchain into one network of use cases. In so doing, users of different blockchains could transact. Besides, Ark provides an open-source code and blockchain creation tools to enable users to leverage blockchain technology.

Ark has won a number of partnerships with different firms including Ledger, Atomic Wallet, Exodus, Changelly, and Spend among others.

Currently, the Ark token is trading at over $0.21.

  1. Lisk

Lisk ICO was conducted in March 2016 raising $6,472,497 USD. During the ICO, a single Lisk (LSK) was going for $ 0.07647059.

Lisk was the first modular blockchain that has the main chain that hosts the LSK coin with other side chains, which are personal blockchain networks attached to the main chain. The side chains are built and tailored using Lisk tools.

Most importantly, the developers of the side chains are allowed to hold their own ICOs. And most importantly Lisk allows developers to use JAVA programming language to develop the side chains.

Besides, several Ethereum players have also invested in this blockchain project.

Currently, the Lisk (LSK) is trading at above $1.11.

  1. QTUM

QTUM ICO was conducted in March 2017 and raised $15.6 million. During the ICO, a single QTUM was going for $0.3.

QTUM is a blockchain network that aimed at bridging Bitcoin with Ethereum’s smart contracts. By this, QTUM hoped to open up more use cases for smart contracts, especially for businesses.

Different business can leverage the tools, templates and smart contracts provided by the QTUM blockchain to enable them to build and deploy the smart contract.

Currently, the QTUM token is trading at above $1.5 USD.

  1. Spectrecoin

Spectrecoin ICO was conducted from November 2016 to January 2017 and raised $15,427. During the ICO, one Spectrecoin (XSPEC) was going for $0.00081.

Spectrecoin platform combines blockchain and tokenized ring signature scheme to add a layer of privacy and anonymity in transactions. By using the ring signature mechanism, any member of the network can append a signature on any transaction and it, therefore, becomes hard to trace the specific person that signed a transaction.

Besides the ring signature, Spectrecoin uses the Tor network to increase privacy within the network. All the nodes in the Spectrecoin blockchain communicate with each other through the Tor network. Therefore, contrary to most blockchains, the transactions carried out within the Spectrecoin go through a number of “middlemen” to make the transactions untraceable.

Currently, the Spectrecoin (XSPEC) is going for over $0.12, which is quite an appreciation from its ICO price.

Conclusion

The above blockchain networks are just examples of the best performing ICOs. There are other blockchain projects like Brave, OmiseGo, Ox, waves, Cardano, ChainLink, and Golem among many others that have used ICO to raise capital for the projects.

Although investors are currently shying away from ICOs due to lack of proper regulations, some countries have already come up with laws governing the ICOs or means of making the ICOs safer, like in the case of the German’s rICO.

If you are in countries where there are rules that have been put in place, you should ensure that you comply with all of them. For instance, if you are from France, you could apply for a VISA from the AMF to have your ICO whitelisted, which would certainly attract investors since they would be sure it is not a scam.

In the USA, the SEC requires you to disclose information about your project to ensure that investors make informed decisions. You may also be required to disclose how the collected funds were distributed, which would certainly instil confidence in your investors.

Failure to comply with regulations may land you into trouble hampering the success of your blockchain project like what was witnessed in the case of Telegram’s TON or the court cases that BLOCK.ONE is facing.

 

France became the first European Union country to craft bespoke regulations for digital asset/token offerings that are not based on past security laws. However, from the time the ICO regulations were enforced in 2019, the AMF has only approved and white-listed two Initial Coin Offerings (ICOs), with the WPO’s GreenToken ICO being the second.

France ICOs regulations

The French regulatory authority, the Autorite des Marches Financieres (AMF), started by conducting consultations on the risk, structure, volatility and applicability of coin offering in crowdfunding between mid-2017 and December 2017. This was after recognizing that digital coin offerings were becoming a global phenomenon and it did not want to be left behind as other countries around the world embarked on coming up with rules to regulate security tokens.

By fall 2018, a bill was tabled in parliament and it went on to be signed to law in early 2019, making France first EU country to have an ICO law in place.  The law which is referred to as the Pacte Law (or Loi Pacte), regulates defines digital tokens and lays out regulations for ICOs and intermediaries providing services related to crypto-assets.

Under the Pacte Law (or Loi Pacte), ICO issuers can legally raise funds by conducting an online ICO. Then after issuing the digital tokens, the tokens can be listed on a crypto exchange to be traded. The ICO issuers are given the liberty to choose to register for a VISA with the AMF to be ‘white-listed’ or to simply proceed with their ICO without the VISA but after submitting a document of disclosure to the AMF to enable token buyers to make an informed decision regarding the ICO.

However, the AMF emphasized that:

Although this approval is optional and ICOs without AMF approval will, therefore, continue to be legal, only those public offerings that have received the AMF approval may be marketed directly to the public in France.

It is also important to note that the new rules only apply for utility tokens. Digital securities are regulated under the old/existing securities regulations

The role of the AMF in the ICO regulations

Under the Pacte Law, the AMF:

  • Examines the disclosure document plus any advertising or promotional material that is circulated or published by the ICO issuer. The issuer should ensure that the disclosure document contains accurate, clear, non-misleading and detailed (outlining the risks that investors would face by purchasing the tokens) information.
  • Verifies that the ICO issuer has adopted enough procedures to protect and track the funds raised in the ICO.
  • Ensures that the issuer conducts themselves per the submitted disclosure document while complying with the regulations. If the issuer violates any of these, the AMF can compel the issuer to stop selling or offering the tokens, stop any advertising campaign and also remove its approval.
  • Verifies that the issuer is a legal entity registered under the French law in France. The AMF can only issue Visas to French-based issuers. Foreign corporations and entities seeking ICO market in the French market are free to do so but without the approval of the AMF.

Once the AMF approves an issuer to conduct an ICO, the issuer gets a VISA and is added to the whitelist of the approved ICOs.

However, it is important to note that the AMF approval is not advisability of the project behind the ICO. The AMF does not verify the technical and financial elements of the project. It also does not verify the computer programs behind the blockchain project. Therefore, it is up to the investor to research these before investing in the ICO.

The first ICO approved by the AMF

The AMF approved the first ICO in December 2019. The ICO was a company called French-ICO that has a platform for funding projects through cryptocurrencies. The ICO was scheduled to start in March 2020.

The AMF Visa that the French-ICO was issued with expires on June 1, 2020.

The ICO targets a minimum of €100,000 and a maximum of €1 million. Once the offering is finished the tokens will be tradable on Zebitex, which is a partner exchange to the French-ICO.

The second ICO approved by the AMF

On May 12, 2020, AMF approved the second ICO, which was for a firm called WPO.

WPO is a renewable energy company that services over 600 solar parks and wind firms across Europe and outside Europe.

In the ICO, WPO is offering its GreenToken (GTK) with a minimum target of €1.5 million and a maximum target of €10 million. According to the firm, one token will be going for €95 and the minimum amount that an investor can invest is €100.

The ICO is scheduled to start on September 8, 2020.

In the future, the GreenToken could be used to acquire goods and services from the GreenToken Network, which taps into the renewable energy industries serviced by WPO.

The tokens are expected to start trading on the SAVITAR exchange, which is a French crypto exchange.

In 2018, Telegram announced its intention to build Telegram Open Network (TON) blockchain and opted to use Initial Coin Offering (ICO) in raising capital for the project. Following this revelation, the social network company joined several other technology companies like Facebook, WhatsApp and Signal in aspirations of building blockchain networks and even issuing cryptocurrencies.

However, most of these blockchain projects have not gone down well especially with the Security Exchange Commission (SEC) in the US. Facebook, for example, has faced rigorous case battles aimed at its Libra cryptocurrency making hard for the company to go ahead with the project.

Telegram, on the other hand, decided to throw in the towel at the beginning of May 2020 after a long court battle with the Security Exchange Commission in the USA. Let us look at the sequence of events that led Telegram to abandon its blockchain project.

Telegram Open Network (TON)

TON, the designated blockchain network that Telegram is set to launch, is intended to offer decentralized cryptocurrency, called Gram, to the users of Telegram who have smartphones.

The cryptocurrency was largely viewed as a rival to the much-publicized Libra of Facebook. However, both cryptocurrencies (Libra and Gram) have faced significant scrutiny by the SEC, which has greatly hampered their development and issuance.

Telegram Pre-ICO in 2018

The messaging app established by the Russian tech expert, Pavel Durov, conducted a Pre-ICO early 2018 raising $1.7 billion from about 171 investors. However, the firm got into trouble after it emerged that about 39 of those investors were from the USA and the SEC had its reservations since the company had not registered the pre-sale.

After, the Pre-ICO, investors were very eager to cash in in the much-hyped ICO. However, the SEC stepped in and ordered Telegram to halt the post-ICO sale due to issues it raised with how its pre-ICO was conducted.

The legal battle

SEC launched a vicious legal battle against Gram ICO in October 2019, after ordering Telegram not to go ahead with its much anticipated Post-ICO.

The SEC accused Telegram of conducting an unregistered token sale to USA citizens. As a result, SEC pressured Telegram to disclose financial documents and answer a couple of questions to shed more light on the disposition of the investors’ funds it raised through the 2018 pre-ICO as required by its regulations.

In March 2020, a US judge dealt a blow to Telegram’s TON project by ruling that it cannot launch the blockchain network nor issue the Gram tokens before the case is settled. This led to a postponement of its April 30, 2020 deadline to launch TON.

However, it was also an early win for Telegram since the same judge barred the SEC from fully accessing Telegram ICO’s financial and banking details. Initially, Telegram’s lawyers had urged the court to throw out the case.

After, the court ruling in March, Telegram wrote to the court promising to issue the required information on the token distribution to investors and the funds collected from the investors to the SEC. Telegram was also to provide the SEC with all the communications, written agreements and amendments of the token sale agreements (including cancelling of the contracts).

All along the court battles were badly hurting the TON project after several postponements until the deadline for the activation of the refund clause in the Telegram’s purchase agreements was reached.

The refund for Gram investors

With the nearing April 30, TON launch deadline, and without any hope in sight for the launching of the blockchain network, investors had the rights to claim for refund as stipulated in Telegram’s purchase agreements refund clause.

According to the refund clause, investors could ask for a 72% refund.

The firm specifically urged the US investors who had invested with it to immediately agree the 72% refund so that they could pull out, claiming that there is an uncertain regulatory environment in the US.

To the investors from other parts of the world, Telegram offered a refund of 110% if they wait till April 30th, 2021.

“As a token of gratitude for your trust in TON, we are also offering you an alternative option to receive 110% of your original investment by April 30, 2021, which is 53% higher than the Termination Amount”

Telegram also announced that the company would allow investors who wait till 2021 to receive Gram or another cryptocurrency on the same term as to what was in the original Gram agreement.

“Purchasers who opted for the loan will have the further option to receive Grams or potentially another cryptocurrency on the same terms as those in their original Purchase Agreements.”

Throwing in the towel

Sadly, after all the drama with the SEC, and trying to retain investors with lucrative 110% returns if they held on till 2021, Telegram finally decided to abandon its TON project.

Early May 2020, Pavel Durov, the founder and CEO of Telegram, announced that telegram had stopped any further involvement with TON.

“Telegram’s active involvement with TON is over………You may see – or may have already seen – sites using my name or the Telegram brand or the ‘TON’ abbreviation to promote their projects. Don’t trust them with your money or data,” Pavel Durov wrote on his channel.

Being the 22nd richest country in the world and with the 7th largest economy in Asia, international investors including blockchain companies have lots of interest in Taiwan. With security tokens proving to be a go-to option for most blockchain companies, Taiwan’s Financial Supervisory Commission in July 2019 recognized the need to officially incorporate security token offering (STO) into the Securities and Exchange Act, which entails the regulatory framework for trading securities, by defining security tokens as securities.

According to the FSC, a security token is a cryptocurrency that is transferable and hold the following features:

  • The owners make capital contributions to the issuer
  • The owners invest in a common enterprise/project
  • The owners expect to receive profit depending on the efforts of the issuer or a third party.

The new Security Token Offering regulations

In January 2020, the FSC proposed deregulating STOs with an equivalent of up to NT$30 million. These STOs are characterized as “Exempt STO” in Paragraph 1 of Article 22 of the SEA. According to the article, these STOs are exempted from the obligation of reporting to the FSC.

Although the deregulation of STOs seemed to be a step in the right direction, the exemption comes with a tight set of restrictions. Additionally, the NT$30 million limit is relatively low, meaning that most of the STOs will not be exempted since most of them have targets above NT$30million.

However, the main objective behind the new regulations is to ensure that STOs in Taiwan are issued by regulated issuers and issued to professional Taiwan investors.

Issuer’s Qualifications

For a company or startup to issue security tokens in Taiwan, it has to be a company listed by shares, meaning it is incorporated per Taiwan’s Company Law.

For an STO to qualify for the exemption, the STOs must be conducted to on the same trading platform with the cumulative placements not exceeding the NT$30 million. The issuer must also ensure that the raised funds are denominated in the New Taiwan Dollar (NT$).

Additionally, the issuer should show the relevant issuance documents in an application to a security firm like the prospectus and security token application.

The prospectus, in particular, should include:

  • The Company Profile and Risks.
  • The Operation Overview.
  • The Operating Plan and Execution.
  • The Financial Overview.
  • An Expert’s Opinion on the Information Technology used in the issuance of the security token
  • Financial (non-certifying CPAs or securities underwriter) Expert’s Opinion about how reasonable the issuance price is.
  • Attorney’s opinion on whether the issuance of the security token complies with the set regulations and if the fundraising project adheres to the set legal rules.
  • Any other documents that should be disclosed and supplemented as per the securities firm notification.

The security firm that the issuers choose to use should have a securities dealer license.

Investors’ regulations

STO investors should be professional investors that qualify as per the criteria under paragraph 3 of Article 3 of the Offshore Structured Products regulations.

For the Exempt STO, the amount that a professional investor can subscribe should not exceed the limit of NT$300000.

Key Takeaways

For an STO to qualify for the “Exempt STO” it should target raising NT$30 million, which is equivalent to $1003764 USD. This is relatively low and means that most of the security token offerings will most likely not fall under the Exempt STO category. The Exempt STO category is however good for the small startups looking to raise a small capital.

Secondly, only professional investors as per the Offshore Structured Products regulations can participate in an STO. Also, the maximum amount that an investor can cash in cannot exceed NT$300,000 on a single STO.

Thirdly, STO funding is limited to the New Taiwan Dollar (NT$). This makes it increasingly difficult for foreign investors. Also, issuers cannot raise funds in other cryptocurrencies or USD as is the norm with most STOs.

Fourthly, an STO can only raise funds through one platform. Therefore, one STO cannot use different platforms to issue security tokens. Also, there is a limit to the number of STOs that can be accepted by each trading platform. This reduces market participation of STO issuers and operators of the trading platform.

Fifthly and lastly, there are many business restrictions and strict qualifications for security token trading platform operators.

After conducting a successful IEO of its stablecoin, JST, on Poloniex on 5th May, the TRON-based stablecoin lending platform succeeded in getting the JST coin listed on MXC Exchange only two days after. The JUST (JST) IEO sold out in just 4 minutes 26 seconds according to TRON’s CEO, Justin Sun.

JST token sale price was $0.00202 during the IEO. Upon its listing on MXC Exchange, its price spiked to $0.04, which was 18.8 times its token sale price, breaking the record of IEOs Return of Investment (RoI) in such a short time. This also thrust the JUST project into the league of the best performing IEO funded projects.

Let’s take a look at what this MXC Exchange means to investors. If an investor had purchased 1000 tokens, it probably cost him/her $2.02. If the investor decided to register on the MXC Exchange and trade the stable coin, he/she would sell it at $40 making a profit of $37.98 in just two days.

Although JST price then lowered from $0.04 in the following minutes, the stablecoin is currently trading at $0.0088, which is 3.36 times the price at which the coin was sold at.

Ideally, if an investor decided to trade in the purchased JST tokens, he would make substantial profits.

The TRON-based stablecoin lending platform, JUST

JUST is a decentralized lending platform that is built on the TRON blockchain. Users in JUST can stake TRX, the TRON cryptocurrency, to generate the JST stablecoin that can be used to pay for a number of things.

The platform uses a decentralized finance (DeFi) lending and governance protocol.

Poloniex’s Tron-powered IEO launching platform

Interestingly, the CEO of TRON, Justin Sun also holds a substantial share at Poloniex Exchange. Sun was among a number of Asian investors who bought Poloniex towards the end of 2019.

By volume, Poloniex is considered the 15th largest cryptocurrency platform. It launched its IEO launching platform, the Poloniex’s LaunchBase, which carries a lot of resemblance to Binance Launchpad.

Projects looking forward to conducting IEOs on Poloniex’s LaunchBase will issue tokens in exchange of TRON’s TRX token. In exchange, the project behind the IEOs will receive professional advice and guidance.

By launching its IEO launching platform, Poloniex joins the growing list of crypto exchanges providing blockchain startups with a lifeline by providing a platform for them to conduct IEOs.

JST was the first IEO to be conducted on Poloniex’s LaunchBase, barely a month after the platform was launched, proving that the platform is up to the task.

Singapore is recognized as a pacesetter in blockchain and cryptocurrency due to its unfailingly supportive regulatory environment. Over the last few years, Singapore has seen a tremendous rise in the number of blockchain projects that have been registered within its borders.

To keep up with the evolving world of digital tokens, the Inland Revenue Authority of Singapore (IRAS) published a guide on the e-Tax that details how digital token transactions including ICOs, IEOS and STOs shall be taxed. These came a few months after Singapore released its new regulations for enterprises offering payment services.

The guide focuses on the taxation of three types of digital tokens. These include security tokens, utility tokens and payment tokens (tokens used as payment options). The guide also elaborates on the taxation of other tokens that are distributed through unconventional means like hard forks and airdrops.

Payment tokens

According to the e-Tax guide, all transactions done using payment tokens shall be considered to be in the form of barter trade. Therefore, the recipients of the tokens shall be taxed depending on the value of the underlying goods or services.

Nonetheless, purchasing a payment token is not taxable. However, the returns from the disposal of the token are taxable if the process involved is a trading activity.

Payment tokens miners shall also be taxed if the mining intends to make profits.

Payment tokens distributed via hard forks and airdrops are not taxable if they are freely given out.

Utility tokens

According to the e-Tax guide, utility token transactions are not taxable since they are mainly acquired to enable the users to acquire future services within a specific blockchain network.

Security tokens

According to the e-Tax guide, security tokens are regarded as a form of equity or debt since they give owners an implied degree of control or equity to a certain asset or project. As such, the taxation of the returns gotten from security tokens depends on the type of the return. The types in consideration here are interests and dividends.

ICOs and STOs taxation

According to the IRAS, the proceeds of Initial Coin Offerings (ICOs) and Security Token Offerings (STOs) shall be taxed depending on the functions and rights of the used token.

If the issued token is a utility token, the sale shall be considered to be in the form of revenue and is therefore taxable. This is because the utility token is an obligation for the issuer to provide a service or good in the future that shall be bought or paid for using this token.

On the other hand, the issuance of security tokens shall not be taxed since the proceeds parallel the proceeds obtained from issuance of equities or debts, which is normally capital in nature. However, as mentioned above, withholding tax obligation and the general income tax shall apply to the interest and dividends paid to the owners of the token.

Tokens set aside for founders in ICOs and STOs

In most cases, startups set aside some tokens for the founders. In this case, if the tokens are used to pay or compensate the founders, they are regarded as revenue and the founder that receives them shall be taxed. However, if the tokens are not issued as a form of payment, they are regarded as a capital asset of the founder.

What a taxpayer dealing with digital tokens in Singapore should do

IRAS instructs taxpayers in Singapore that deal with digital tokens to keep proper records of the digital token transactions so that it can be simple to file the returns.

The records should have the following:

  • Transaction date.
  • The number of tokens sold or received.
  • Value of the digital token at the time of transaction.
  • The used exchange rate.
  • Purpose of the transaction.
  • Details of the customers/suppliers in case it was a buy or sell transaction.
  • Details of the ICO or STO.
  • Invoices or Receipts of the expenses incurred within the business.

Blockchain has become a booming industry and starting a blockchain startup would certainly be a great idea at the moment. Several blockchain projects ranging from crypto giants like Ethereum, Bitcoin, Stellar, CitiOS, and the like to smaller projects like Cosmos, Storj, Aragon, Augur and the like, have been started in the past years and they have registered tremendous growth. These projects serve as great indicators that blockchain technology adoption is on the rise and you can definitely grab the opportunity by starting your blockchain project/startup.

Nonetheless, for your blockchain project to pick, you will have to convince investors to invest in it. This is the hard part for most blockchain startups!

A good blockchain project is good, but it is not everything. The growth of blockchain projects is determined by how the public adopts it. You need investors to invest their money into the project! So how do you get the investors to recognize your blockchain project and invest in it? What do investors look for in a blockchain project? To attract investors to your blockchain startup, you have to tackle these questions. These questions should be addressed in the whitepaper, Press Releases (PRs) and other marketing strategies like social media platforms.

What investors look for

Below is a guide to some of the things that investors look at:

Clear problem statement and solution

This is the anchor of your blockchain startup and it cannot be over-emphasized enough. You have to clearly state the king of problem you intend to solve and how you intend to solve the problem.

Most importantly, this problem should be something that affects a large group of people to ensure large market growth. A niche problem focused on just a certain minority group of people will certainly attract a few customers, meaning its market growth will be limited.

Your solution to the problem must also be something workable. You should clearly show the investors that it is something that can be done.

Prove that you are better than any other solution in the market

If your projects stand out among your competitors, customers will prefer it to your competitors and that would translate to a higher chance of market growth.

Therefore you have to ensure that your solutions stand out. You also have to explain to the investors how it stands out.

Additionally, you have to take precautionary steps to ensure that your solutions remain ahead and that it is not replicated by other startups. Some of the best ways to do so are by applying for patents, copyrights and trademarks.

A competent team

A qualified team acts as proof to investors that the project will become a success. A project could look great on paper, but without the right team, it could remain just that. You need the right minds for the project to materialize.

That is why it is imperative to higher professionals for all the roles in your blockchain project. To show the investors that you got the best team, you should include the qualifications of each team member in his profile on your website and the whitepaper.

Growth potential

After, showing your potential investors what your startup does, what problem it intends to solve, how your project intends to solve the problem, and how your solution is better than other solutions currently in the market, you have to also show your investors how you shall reach the market and make money for them to also benefit if they invest with you.

Investors look for projects that have a stable marketplace that is full of consumers. Therefore, you will have to show them the group of people you are targeting as customers, how that market base will grow, and what will make them want to use your product. By doing so, you will prove to the investors that there is a potential stream of revenue that will ensure that their investments keep working for them.

Clear business model

Apart from solving a certain problem for the society, your blockchain startup should have a clear replicable business model that will instil confidence into the investors that your project will become a success.

Most importantly, your business model should be scalable and readily adaptive to ensure that it accommodates immerging markets.

Clearly Presented margins

It is always very important to realize that although investors decide to choose your blockchain project because they believe in it, they are also looking to make some extra money. Nobody would invest his/her money into something expecting zero returns.

One of the best way to prove to investors that your project is going to give them good returns is by clearly and professionally presenting the margins of your startup/project. Promising margins will certainly make investors interested in your blockchain project.

As the novel coronavirus ravages the world, killing thousands, almost everything tangible including paper cash has been classified as a medium of conducting the COVI-19. Physical money isn’t safe anymore. You cannot know who touched it; did they have the virus!

And as a result, governments have resulted in the use of electronic payment methods with countries like Kenya upping its use of mobile money transfers. Other countries like South Korea had temporarily removed cash from circulating while China had recalled its paper cash for sanitization using ultraviolet rays.

However, mobile money and some of the other electronic payment methods that are currently in use are dimmed to be slow and could not possibly be efficiently used to deliver government stimulus to households or businesses.

Besides, most of the traditional electronic money transfer methods like mobile money, PayPal, Neteller, and the like are still centralized and depend on traditional banking systems.

As the majority of the world’s population currently works from home, the world could be preparing for the next phase of a technological boom, and blockchain technology could be it.

Central Bank digital currencies

At the beginning of April this year, the Bank of International Settlements (BIS) researchers suggested that the current pandemic would accelerate the adoption of digital currencies and fuel the debate of central banks issuing digital currencies.

And as a matter of fact, several central banks have started looking at the possibility of issuing digital currencies to reduce the use of paper cash which they are being forced to recall back for cleaning or destroying.

China became the first country to announce that it is going to launch a central bank digital currency, with the four largest commercial banks there starting a test of the digital currency this month. The city of Suzhou even suggested it is going to give some of the digital Yuans to government employees in the coming month for use for transport.

In the US, the House democrats suggested a digital dollar in a draft bill for the recently signed stimuli package. According to the members of the congress, the digital dollar would be rolled out by the central bank and distribute money directly to businesses and households. In this way, the process of distributing the stimuli package would be faster and more efficient.

In Europe, the German government is proposing the use of Euro-tokens that could be used in providing consumption vouchers that are based on blockchain. France also launched the atrial phase for testing the integration of the digital euro in settlement procedures.

Cashless economy

Currently, the cashless economy does not necessarily mean a blockchain or cryptocurrency-based economy. Companies like Visa and Mastercard have long been in the market and they have helped promote the cashless economy for a while. Nevertheless, these companies are centralized, and cross border transactions are still expensive and time-consuming thus the need for better infrastructure and blockchain is the best shot at filling the gap.

Though governments have viewed cryptocurrencies as rivals to their centralized financial systems, it is just a matter of time before we witness a complete adoption of digital currencies in government institutions starting with the central banks.

The adoption of digital currencies will mean that government institutions like central banks will have to use blockchain technology to launch digital currencies.

According to WeeTracker media firm, African startups raised about $1.3 billion from venture capital funding in 2019, which is an improvement from the past years. Nevertheless, startups in Africa still face enormous challenges when it comes to funding projects due to a lack of liquidity.

Blockchain technology could step into the gap and help startups especially in the emerging tech hubs like Kenya, Nigeria, and South Africa to raise funds for their projects through blockchain-powered equity crowdfunding. Equity crowdfunding has helped revolutionize the way businesses raise funds from investors.

By adopting blockchain technology, startups do not have to go through the tedious process of getting their companies listed on the stock markets to sell their shares.

Why investors hesitate

In Africa, the ecosystem for doing business is still not that favourable for startups to achieve reasonable growth in a short time span. Most startups struggle to make ends meet due to factors like high taxes, which are common in many African countries. In some worst-case scenarios, some startups end up closing shops. This makes investors shy off from investing since they are not sure if they will live to get the returns.

Also, in Africa, secondary markets are scarce resulting in low market liquidity for investors to exit from investments. Venture capitals, for example, look for entrepreneurs that build sustainable businesses with promising exit opportunities. For a startup to win a venture capital investment, it has to have at least an IPO, merger, or some acquisitions, which are only possible if a startup achieves a certain level of growth.

To create the necessary liquidity, startups in Africa could adopt blockchain technology to enable them to tokenize their assets.

 How token-based financing increases market liquidity

By using blockchain, startups can create tokens (either utility or security tokens). They can then go ahead and sell the tokens through Initial Coin Offerings (ICOs), Initial Exchange Offerings (IEOs), or Security Token Offering (STOs) for the case of security tokens.

Investors will find it safer to invest in startups by buying tokens since the tokens are easily traded in exchanges where the liquidity is high. If an investor purchases some tokens from a startup, and the startup succeeds to get the tokens listed on a cryptocurrency exchange, then the investor can trade the tokens and make some profits. In most cases, the price at which the tokens are listed on the crypto exchanges is usually higher than the price of the tokens during the initial offerings.

Therefore, an investor could decide to exit the market immediately the tokens of the startup get listed on an exchange.

Besides, since a good amount of investment in Africa comes from outside Africa, token financing offers the best opportunity to tap into the external sources. Blockchains are usually decentralized and they allow cheap and fast cross broader transfer of funds. Therefore, investors from any corner of the world can easily purchase the tokens of a startup in Africa without necessarily having to travel to a specific country or sign huge volumes of paper agreements.

Examples of African startups that have reaped big from token financing

Below are some startups that have raised funds through token financing by conducting ICOs, IEOs, and STOs.

  1. Golix

Golix, a Zimbabwean crypto exchange that was started in 2014. In 2018 Golix conducted an ICO that raised $23 million by offering their GLX token.

  1. BlockBank

The UK’s BlockBank that acquired some stake in Kenyan Spire Bank. BlockBank was able to raise about 12.8 million in its pre-ICO conducted in 2018.

  1. Wala

Wala, the “zero-fee money app” South African startup that was able to raise $1.2 million through an ICO conducted in 2019.

  1. Mazzuma

Mazzuma, a Ghanaian startup that was raised over $45,000 in its third token sale phase after successfully conducting a pre-phase, first phase, and a second phase.

Blockchain technology is revolutionizing every aspect of our lives. Besides the impact of blockchain technology on Governments, financial institutions, and conglomerates, blockchain technology has also proved to be a game changer when it comes to the way small Fintech startups raise capital. Startups can now conduct Initial coin Offerings (ICOs) among other methods to raise funds for their projects.

However, for an ICO to be successful, the development team has to diligently choose the blockchain protocol upon which their project’s token will be built on. This is mainly because the functionality of the token will greatly be influenced by the chosen blockchain protocol.

Besides, there are other blockchain technology use cases that the startups can benefit from the blockchain protocol they choose to use. Some of the most profound use cases include asset management through asset digitization, decentralized finance, global trade & commerce, and payments.

Advantages of using blockchain technology

  1. Ability to streamline and automate executions. The use of smart contracts, for example, has made it possible for businesses to eliminate intermediaries and thus streamlining business processes and allowing real-time clearing and settlements.
  2. Increased security during transactions. The fact that the data stored on blockchain networks is immutable transactions tamper-proof and thus authentic.
  3. Ability to develop and deploy permissioned blockchain networks that have a shared business logic and customizable governance.
  4. Ability to digitize assets. This is what has made it possible for startups to conduct online crowd funding through methods such as ICOs.

Most used blockchain protocols for creating ICO tokens

1.    Ethereum

Ethereum is an open-source, public Blockchain distributed computing platform that features smart contract functionality. It was the first such blockchain platform to be developed and it has paved the way for the development of many other blockchain networks that are based on its blockchain architecture.

Ethereum was the first blockchain protocol to prove that blockchain was not only meant for the creation of cryptocurrencies for payments as its predecessor, Bitcoin.

Ethereum provides a platform for blockchain developers to develop decentralized applications. The decentralized applications developed on Ethereum are usually accessible from anywhere in the world. Also its ERC-20 token standard has earned itself a reputation when it comes to the development of cryptocurrency tokens. Actually, most of the altcoins use Ethereum’s ERC-20 token standard.

The token used for conducting transactions within the Ethereum network is called Ether (ETH) and it is normally generated by the platform as a reward for mining nodes the performed computations.

Some of the notable features of Ethereum apart from the smart contracts include the Ethereum Virtual Machine (EVM) that executes scripts through a network of public nodes throughout the world and Gas, which is its internal transaction pricing mechanism.

Ethereum use cases largely revolve around smart contracts and dApps.

Pros of Ethereum enterprise use cases
  • Ethereum supports the development of decentralized applications (dApps). Therefore business enterprises can use the platform to write customized blockchain codes that whose performance is oriented towards the specific business enterprise.
  • Ethereum has a very promising use case in decentralized finance (DeFi). Enterprises can use Ethereum’s smart contracts to issue or go for smart contract powered loans. Developers can also use the smart contracts to mint stable coins as in the case with the MakerDAO project. Smart contracts can also be used in creating decentralized exchanges.
  • Ethereum has proved to be of great use when it comes to tokenizing real-world assets. One of Ethereum’s use cases in line with this is the PolyMath, which has embarked on the creation of a revolutionizing platform for creating security tokens.
  • The decentralized nature of Ethereum and the decentralized applications developed on it make it impossible for hacking attacks.
  • Ethereum’s smart contracts have completely revolutionized the way transactions are made. Instead of writing paper agreements, the transaction agreements can now be recorded in a computer code. In so doing, it has eliminated the need for intermediaries, and parties can now transact directly.
Cons of Ethereum enterprise use cases
  • Though Ethereum’s smart contracts can be easily used in generating digital identities. It has proven to be extremely difficult for governments or regulatory authorities to check the authenticity of digital identities.
  • Ethereum was designed to work through the proof-of-work (PoW) consensus mechanism, which makes it less scalable compared to other blockchain networks. And although there are plans to switch the consensus mechanism from PoW to PoS, the process is not that easy.

2.      Stellar

Stellar is a decentralized open-source blockchain network that allows cross border transactions by converting the currencies to digital representations. The network uses a cryptocurrency token known as Stellar Lumen to facilitate transactions within the network.

Some of Stellar’s uses cases involve its integration into Vumi, an open-source messaging platform, enabling Vumi to use cellphone talk time as airtime. Stellar also was integrated into Oradian’s banking platform to enable the bank top to add microfinance institutions in Nigeria.

Stellar has also partnered with several banks including Deloitte, IBM, KlickEX to facilitate cross border transactions.

Pros of Stellar enterprise use cases
  • The stellar network makes cross border transactions cheaper since it eliminates the need for intermediaries. It only costs an average of 1/100,000 of a penny per transaction.
  • Stellar also makes the cross border transactions to be faster compared to the use of traditional means. Stellar can easily achieve 10,000 transactions per second with an average on-chain settlement time of 5 Seconds.
  • Digital currencies developed using Stellar can be traded on StellarX, which is Stellar’s decentralized exchange platform.
  • Stellar has smart contract functionality and users can be developed and executed smart contracts.
  • With Stellar, there are no limits. Businesses can transact any amount at any time to whatever location.
  • Stellar has the necessary documentation, tooling, and support to help enterprises get their project quickly.
Cons of Stellar enterprise use cases
  • All Stellar accounts are required to have a certain minimum balance of lumens.
  • Stellar’s smart contract is not as developed as those of Ethereum blockchain.

3.      Binance Smart Chain (BSC)

Binance smart chain (BSC) is a blockchain-based platform launched by Binance that shall enable developers to issue new cryptocurrencies as well as ICO coins. The platform supports smart contracts and decentralized applications (dApps).

The Binance smart chain shall run parallel to the current Binance Chain blockchain.

Binance smart chain gives Binance Company its blockchain rather than depending on Ethereum.

Pros of Binance smart chain enterprise use cases
  • Enterprises can easily create customized blockchain networks for use in their businesses.
  • Just like Ethereum, Binance smart chain has smart contract functionality which can be of great help in business transactions.
  • Binance smart chain enables developers to come up with their cryptocurrency tokens that can also be used for Initial Coin Offerings.
  • Binance smart chains also make it easier for the cryptocurrency coins developed to be listed on Binance exchange.
Cons of Binance smart chain enterprise use cases
  • The binance smart chain features a delegated proof-of-stake (DPoS) system of governance, which is prone to centralization. Centralization would stifle creativity among dApp developers.

4.      Tron

Tron protocol is a blockchain network that provides a decentralized virtual machine that can execute a program through the network of public nodes within the network. TRON TRX is the cryptocurrency token used within the Tron network.

There are several use cases for Tron, key among them being the ability to use TRX as a payment system. Websites like travala.com have incorporated TRX as a mode of payment already.

Another use case for Tron was the partnership with BitTorrent, enabling it to use a token called BTT, which is a Tron based digital coin.

TRX has also found lots of use in the world of online gaming.

Pros of Tron enterprise use cases
  • Transactions within the Tron network are free.
  • The transaction speed is relatively high since the system can conduct 2000 transactions per second.
  • It allows dApps developers to easily develop applications (dApps) that are custom made according to the requirements of the enterprise and deploy them.
  • The TPS is much more improved in Tron thus giving Tron a high throughput.
  • Tron also has high scalability and it gives developers a wider variety of ways to deploy their applications.
Cons of Tron enterprise use cases
  • Tron’s whitepaper suggests quite a lengthy development timeline that suggests that we may not be seeing the real application of TRON come to life soon. That leaves Tron users with only one choice of buying TRX and trading it on exchanges or using it as a payment option.

5.      Cardano

Cardano is an open-source decentralized public blockchain network that features smart contract functionality. It was built to improve the financial system.

Some of the renown Cardano use cases include the GRNET, released in 2018 for checking student diplomas, the New York Ledger Accelerator (SOSV) and Traxia, released in 2018 for converting invoices into smart contracts so that they can be sold as short-term assets,

Pros of Cardano enterprise use cases
  • It allows the use of smart contracts and provides blockchain developers with a network to develop and deploy dApps.
  • Cardano has proved to be flexible, secure, and scalable for enterprises. This is mainly due to the use of the Proof-of-Stake consensus mechanism.
  • Cardano integrates a wide range of digital coins without the use of an intermediary.
  • It also combines regulation and privacy.
  • It is one of the few blockchain networks that go through a third party audit, thus making it highly transparent.
  • Cardano blockchain network is made up of two layers, the Cardano settlement and ledger processing transactions layer and the Cardano computation layer that supports smart contracts and provides users with a platform for building DApps. This makes it less prone to the disruptions brought about by soft and hard forks.
  • There is a middle layer made up of side chains that connects the two main layers. This makes Cardano more scalable.
Cons of Cardano enterprise use cases
  • Cardano introduces its programming language called Plutus and developers could have a hard time trying to learn the new programming language to be able to develop dApps on the platform.