IdentityMind Global Working with Over 10% of Companies Conducting a Compliant ICO and Over 25 Virtual Currency Exchanges Around the World
July 10, 2018
IdentityMind Global Delivers Mid-Year Insights Into State of ICOs and Virtual Currency Exchanges
PALO ALTO, CA., July 10, 2018 – IdentityMind Global™, Digital Identities You Can Trust, today announced key mid-year 2018 insights into Initial Coin Offerings (ICOs) and virtual currency exchanges, including key findings in regulation uncertainties, dynamic pricing movements, and new virtual currency exchanges growing and moving.
“IdentityMind is now working with over 10% of companies conducting a compliant ICO and over 25 virtual currency exchanges around the world,” said Neal Reiter, Director of ICO and Virtual Currency Business Unit, IdentityMind. “With that much interaction we have gained a huge amount of knowledge and insights about the ICO and virtual currency markets.”
IdentityMind is a leader in software for digital identity-based compliance, risk management, and fraud prevention. It has assisted more than 165 clients conduct an initial coin offering (ICO) or security token offering (STO). More than $6 billion was raised via ICO/STO’s in 2017, and already in Q1 and Q2 of 2018, $13.7 billion has been raised.
“IdentityMind insights are unique given our ongoing consultations with government regulatory bodies worldwide, existing clients, domain expertise in ICOs, STOs, digital currencies and virtual currency exchanges,” said Reiter. “The bottom line? We facilitate regulatory compliance, fast track onboarding, and accelerate time to revenue for our clients.”
According to Reiter, IdentityMind’s unique insights are based on conversations and consultations with over 650 global companies conducting ICOs in 2018, from large utility tokens with over 25,000 contributors requiring know your customer (KYC) to small security tokens with 10 contributors needing KYC and accredited investor verification. IdentityMind has also spoken with over 65 companies launching a virtual currency exchange in 2018 and works today with over 25 exchanges worldwide.
Listed below is what IdentityMind learned at mid-year 2018, and what the company expects to happen the rest of the year.
Initial Coin Offerings (ICOs)
- Regulation Uncertainty Continues: Where Bitcoin, the world’s first virtual currency, was several several years ago, is where ICOs are today – lacking clear guidance in the U.S. and internationally.
- The View from the SEC: U.S. Securities and Exchange Commission (SEC) commissioner Robert Jackson’s recent comments that he “…hadn’t seen an ICO that wasn’t a security…”, and subsequent SEC letters to companies, has forced many companies to slow down and examine where they stand on the utility token/security question. More recently, Mr. William Hinman, SEC’s Director of the Division of Corporation Finance, stated that neither Bitcoin nor Ethereum are securities, which eased some concerns, as the majority of ICOs are based on Ethereum. In speaking directly with the SEC, IdentityMind was able to gain insights about this topic.
- The View from FinCEN: Companies are very concerned that if they’re not a security, their ICO is a Money Service Business (MSB) per the Wyden letter. As discussed here, FinCEN’s March 2013 guidance states that a currency, virtual or not, that’s exchanged for another currency, is a MSB. Thus, companies receiving Ethereum for ERC-20 tokens are a MSB. The question now is whether FinCEN will enforce these regulations, and if so, when.
- Dynamic Pricing Movements: The price of Bitcoin has risen and then fallen this year. As the price has dropped, so has the number of ICOs, especially in the last few months. We’re seeing ICOs with a similar number of contributors, but lower amounts raised as the price of Ethereum is 40% lower than earlier this year.
Looking out at the second half of 2018, IdentityMind anticipates the following events transpiring on the ICO front:
- Regulation is Going to Get Worse Before It Gets Better: “The SEC has and will continue to shut-down blatantly fraudulent ICOs, and will start targeting ICOs that claimed to be utility tokens, but are really securities and should have been security tokens from the beginning,” said Reiter. “We’re not expecting FinCEN to target a company that has conducted a utility token ICO sale for not registering as a MSB, but if they do, expect a complete halt to utility token ICO sales in or available to U.S. residents.”
- Regulatory Uncertainty Affects the Price of Bitcoin and Ethereum: “If there is favorable regulation, expect the price to rise,” said Reiter. “However, if uncertainty continues, or agencies take aim at companies, expect a strong price dip.”
Virtual Currency Exchanges
- Explosive Growth in Virtual Currency Exchanges: According to Reiter, there’s tremendous growth in exchanges, but most people probably just aren’t seeing it. “In 2013, when the price of one Bitcoin went from $150 to $1,200, we saw the formation of hundreds of exchanges in the U.S. and Japan,” said Reiter. “However, this year while Bitcoin’s price has fluctuated from $17,000 to $6,000, and while we again saw a large number of exchanges, this time they were in Latin and South America, South Asia and Africa.
- Major Virtual Currency Exchange Players are Migrating: While smaller players are hard-pressed to go into larger and established markets, we are seeing the large players giving it a go, hoping to find efficiencies due to their size and ability to subsidize losses in the meantime. To that end:
As we move into the second half of 2018 IdentityMind anticipates the following developments:
- Companies such as Huobi will continue to expand, vying to be worldwide exchanges.
- The shaking out and establishment of companies that will take leadership positions in countries without established leaders such as India, Indonesia, and Nigeria.
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About IdentityMind Global
IdentityMind Global, Digital Identities You Can Trust, provides a SaaS platform that builds, maintains and analyzes digital identities worldwide, allowing companies to perform identity proofing, risk-based authentication, regulatory identification, and to detect and prevent identity fraud. Built-in transaction monitoring enables e-commerce fraud prevention, anti-money laundering (AML), and counter terrorism financing (CTF). Our patented eDNA® technology securely tracks the entities involved in each transaction (e.g. onboarding, account origination, money transfers, online payments, etc.) to build unique digital identity trust reputations. This reputation is anonymously shared between customers in IdentityMind’s Global Identity Network. For more information, visit IdentityMind on Web, Twitter, LinkedIn, Facebook, Blog, and Google+.
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Director of Corporate Communications