As there is an increasing amount of investor fraud going on in the ICOs space, Google has taken it upon themselves to regulate their advertising services. Effective March 2018, Google will ban the advertising of initial coin offerings. In fact, this follows in the footsteps of Facebook and Chinese search engine Baidu that have finally banned cryptocurrency advertising and ICO. One of the reasons for this ban is that ICO is a highly lucrative fundraising method for people to gain money and run away with it.
ICO is well known as a fundraising mechanism within the cryptocurrency industry, used to distribute new tokens. Investors are offered financial returns through an increase in valuation for the coins. The development team behind the ICO typically has to explain to their target market the technology behind their offering. Then they will have to convince their investors to invest in the project because of the potential growth and mainstream adoption of the cryptocurrency.
One unique thing about initial coin offering is that investors are not offered an ownership stake. Instead, they are only offered a financial return. This makes it highly risky because the developing team can take all the money and investors won’t have any legal ground to go after them. With Google’s ban, initial coin offering providers will find it difficult to penetrate into the market.
Most of the online platform giants have taken similar steps to ban the advertising of cryptocurrencies. As these giant platforms play a huge role in allowing advertisers to reach their target market, this can truly cause a complication in the marketing strategy of an ICO. Today, more government agencies are cracking down on initial coin offerings to ensure that investors stay away from fraud. Therefore, anyone who wants to create an ICO will have to find another method to promote their ICO.
In January, Facebook banned advertising related to cryptocurrencies for the same reason. They felt like most of the companies engaging in the advertising activities were not acting in good faith. Google followed in Facebook’s footsteps a few months later, despite being a little bit late to the regulatory landscape. On top of that, Google is banning initial coin offering advertisements because they want to remain compliant with legal regulations as there have been no clear regulations around cryptocurrencies. These online platforms have to self-regulate, and the best bet is to stay on the safe side.
One good thing about the bans is that search results are not banned. Therefore, ICOs will have to research how they can improve their search engine optimization techniques. The banning that comes from these online platforms was not unanticipated by ICOs. In fact, they believe that this move will help to make the ICO industry more transparent.
Therefore, a genuine ICO will have to work hard to make their business model more trusted to the general consumers relying on marketing hype. That said, simply banning the advertising of ICO will not put an end to this funding mechanism. The only ICOs that are probably going to be affected are those that are not serious.
As a result of the fraud in the space, a lot of ICOs are getting a bad rep. It seems that there is always one story on the headline every day that talks about how ICO scams people. For a reason, this causes regulators to look closely into the ICO space and took steps to regulate it. As a result, professional investors may be holding back their investment as they are unable to judge between a good and bad ICO.
Examples of scams in the cryptocurrency space
Tezos is an example of a blockchain start-up that used the ICO space for their benefit. After crowdfunding millions of dollars, they told their investors that the money is only going to be a form of a donation to the platform instead of receiving a specific financial return from it. As a result, the firm is getting sued for millions of dollars by their ICO investors. The ICO industry can be a gamblers den to the securities market.
Maksim Zaslavskiy is the founder of the Brooklyn-based start-up that was selling unregistered securities. Investors that are putting money in his business were told that they would be able to receive a good amount of return from his operations. The only problem with that is there were no ongoing operations. PlexCoin is another example of this ban that was marketed to investors in the US saying that it will gain a high profit within a month.
From all these examples, you can see how scammers take advantage of uninformed investors. In fact, one can say that ICO is a profitable playground for people to become rich overnight without having to prove their worth. For instance, hedge funds are not allowed to advertise to retail investors. However, ICOs which are just as risky, are allowed to advertise on Google for over a year. As a result of this ban, ICOs will have to learn how they can create a genuine hype around their products and technologies.
On top of that, these ICOs shouldn’t be targeting uninformed investors to just pump money to raise awareness. Therefore, experts believe that the banning done by this social media platforms is a great move towards cleaning up the ICO industry. Although the ICO industry won’t entirely go away after the Google ban, it still packs a serious blow.
In fact, the past few months have seen investors getting more serious about where they are putting their money. For the ICO companies, marketing was a huge part of their budget allocation. Now that Google and Facebook have both the left the scene, they are unsure which direction to move into. Therefore, the current ICO scene will groom new players in the market that didn’t know how to create awareness of the project and sell themselves directly to the target customers.