On Monday, a post by Binance CEO Changpeng Zhao on the company’s Medium blog outlined the reasons why he felt that ICOs were a boon to economies that chose not to ban them.
“I would say that raising money through ICOs is about 100 times easier than through traditional VCs, if not more. With the ease of raising money increased, logic says there may be 100 times more startups, well-funded startups, where ICOs are allowed,” he wrote.
Zhao believes that countries where startups can find financing much more quickly than through the channels they’ve used previously would have more competitive economies. Although there is not yet enough data to back up that statement, the number of startups that owe their existence to the ERC20 protocol is overwhelming.
He puts things into perspective with regard to investors as well, showing that traditional venture capital models of fundraising leave out millions of people who might want to be a part of the startup’s success.
“Say you wanted to invest $1,000 in the $50MM round for Uber. Guess what; they won’t take your money. Even if you had $1MM, they may or may not take it. They are likely being courted by more famous VC investors. Of course, you can TRY to give your money to a famous VC investor, if you meet their minimum threshold for investing, which is often a few million dollars,” he continued.
While it’s entirely possible to invest smaller sums of money into an ICO, it doesn’t work quite that way in some countries. US-based ICOs, for example, are currently facing trouble understanding what the SEC means by “utility.” As a result of this, they’re offering new instruments called SAFTS, which transform the ICO into an exclusive club for large institutional investors.
This is an administrative issue rather than one inherent in ICOs themselves. Zhao acknowledges that this new fundraising mechanism isn’t perfect.
“We are still in [the] early days of the industry, You can’t make advancements without encountering problems. Properly dealing with issues is how progress is made. If we had given up on e-commerce/internet because there was identity theft or credit card fraud, where would the world be today?” he wrote.
He then concluded by pointing out the fact that even venture capital firms are investing heavily in ICOs, adding that governments are not as quick to catch on. Those that move fast to get in on the action, Zhao said, will “reap exponential benefits.”
This article appeared first on Cryptovest
