The fundraising process that helps launch new cryptocurrencies known as an initial coin offering, or ICO, is being rebranded. CEO of Overstock, which is under Securities and Exchange Commission (SEC) investigation, says there's a safer way to raise money through crypto: Security Token Offerings, CNBC reports.
"It's the new term," Overstock CEO Patrick Byrne said. "The industry is distinguishing very clearly now between ICOs and STOs."
According to him, it is a very clever offering, and could represent a whole new model for American entrepreneurship.
In a Security Token Offering, coins or tokens can also be bought in the offering, but unlike many ICOs, these tokens must be backed by something tangible like assets, profits, or revenue of the company.
SEC Chairman Jay Clayton said in March that all ICOs constitute securities. Therefore, Byrne says by using the term "security token offering," issuers are being more upfront with regulators that what they're trading are actually securities.
"The ICO craze of last year created a toxic waste dump of financial assets. To me, that world of ICOs is a superfund site," Byrne said. "What we're developing is a mechanism so that there will be a legal way to go forward, and not create any new toxic waste."
He called what some ICOs were doing "flagrantly illegal."
ICOs have raised roughly $9.8 billion through ICOs since 2016, and SEC has warn investors of pump-and-dump schemes in ICOs. The regulator recently chargede backed by Floyd Mayweather and DJ Khalid with fraud.
This week, Overstock announced a $2.5 million investment in three-wheel car startup Elio Motors. The automaker also announced the launch of "ElioCoin" to fund production and made clear in an announcement it was a "security token offering."
By Jade Olafson