Launching an ICO is just like planting a tree, If you do it properly, sure it can yield you a quick capital for your startup. So it is must for you to understand the security issues which you have to overcome during the launch of an ICO?
1. Ensuring whether the tokens are legally securities
2. Exempting anti — fraud provisions, Such as SEC Rule 10b-5
3. Exploring the issuer of tokens
4. Equally distributing the token share to the investors
5. Enhancing the buy-sell system of crypto tokens
The Different Roles Of Crypto tokens in an ICO Launch
Security issues may differ based on the type of ICO, in general, there are two types of ICO
1. Utility ICO
2. Security ICO
And the tokens which involve in these type of ICO’s are classified into two, as below
1. Utility tokens
2. Security Tokens
Utility Tokens :
Utility Tokens are commonly used by the users. It represents the future access to a product or service provided by a company. Utility tokens are not designed as investment entities this exempts the utility tokens from federal laws governing securities. By creating a utility token a startup can sell it as a “digital token” for accessing its services and products.
ICO is a derivative of IPO, so to differentiate it from security offering, token creators refer these crowd sales as TGE’s( token generation Events) or TDE’s (Token distribution events)
Security Tokens :
If a crypto token derives its values from external source or tradable asset classes, then it will be considered as security tokens. It is subject to the regulations of federal security. Failure to abide these federal regulations may cause you to derail the ongoing project and will result in costly penalties. Generating the security tokens creates a potential for accessing a variety of different applications, most preferably represents the shares of a company’s stock.