NASDAQ, the second-largest stock exchange in the world by market capitalization, says that their exchange is the best way for companies to raise cash. The US-based exchange continued to explain that Initial Coin Offerings (ICOs) are still an immature funding method. During the Web Summit tech conference in Portugal this Tuesday, an executive from the exchange said that ICOs are “too young” and unregulated despite their rapid growth.
Nasdaq vice chair, Bruce Aust, told CNBC:
“ICO is very young and early stage and Nasdaq has always been at the forefront of helping companies raise capital, whether it be in the Nasdaq private market or through the Nasdaq public markets. So we believe that we are the market for companies to raise capital.”
He further said that what differentiates NASDAQ from ICOs is the fact that NASDAQ is regulated and ICOs are not. "We are a regulated market; I think that's the difference between us and an ICO. And we'll see at some point those markets become regulated and that will change everything," Aust said.
An ICO, a popular yet controversial form of crowdfunding, is when a startup raises cash by issuing digital tokens in exchange for a Cryptocurrency such as Bitcoin. ICO investors can then either trade the issued token on an exchange or utilize it to do something with the startup that issued it in the first place. The Initial Public Offering (IPO) is similar to ICO, as both allow investors to buy shares in a company. What differentiates an ICO from an IPO is the fact that with an IPO, investors usually have stakes in the company.
This is not the first time for ICOs to have been discouraged. While some countries like Singapore and Canada have only issued warnings against the unregulated funding method’s risks, others like China and South Korea have gone as far as to completely banning them. Moreover, Wikipedia founder, Jimmy Wales, called ICOs an “absolute scam”; Jordan Belfort, the “Wolf of the Wall Street”, called them “the biggest scam ever”; and JP Morgan CEO, James Dimon, called ICOs a bubble that “will eventually blow up.”
However, ICOs are not short on supporters either. Regulators in Abu Dhabi have begun regulating them and many other countries are making similar efforts. ICOs have been able to raise around $3.2 billion this year so far, still a small number as compared to the $126.9 billion raised via IPOs.