Han Verstraete, founder and CEO at Singapore-based blockchain company Otonomos, told CNBC last month that the legality and the mechanics of doing an ICO need to be improved.
Verstraete explained that many in the latest cohort of digital tokens are basically securities offerings, despite the underlying technology. They are, however, not yet subjected to the same level of regulatory scrutiny as mainstream share offerings. Indeed, that is an area that regulators are currently studying.
The mechanics of an ICO also need improving to include some form of accountability for the start-ups, he said.
“We are debating, as part of the community, ways of significantly improving the actual model. If you’re going to offering securities through an ICO, do it perhaps in a number of successive capped rounds that are somehow linked or triggered by milestones that you commit to.”
Mistletoe’s Son also said that eventually ICOs will become more sophisticated, with new techniques and technologies and some regulation to protect investors from fraud.
Digital token sales are seen as a relatively easy way to raise capital, but many investors argue they do not offer the same kind of value as venture-backed money.
“A lot of the times, it’s not just about the money,” Michael Descheneaux, president at Silicon Valley Bank, told CNBC. “It’s about networking, it’s about the know-how, making connections, and making introductions and finding people for you.”