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ICO as a New Form of Financing of Innovative Business

Ivan A. Belarev () and Elena B. Starodubtseva ()
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Ivan A. Belarev: Financial University under the Government of the Russian Federation, Moscow 125993, Russian Federation
Elena B. Starodubtseva: Financial University under the Government of the Russian Federation, Moscow 125993, Russian Federation

Finansovyj žhurnal — Financial Journal, 2019, issue 5, 104-118

Abstract: Nowadays, innovative business is looking for new ways of raising capital for its financing. More traditional sources of financing are not always available, or are quite expensive due to the high risk involved. However, they are being replaced by new financing instruments. One of these is the issuing of tokens, which are then placed on the stock exchange, thereby attracting the necessary capital in exchange for cryptocurrency. Despite the fact that ICO has appeared relatively recently, it has made it possible to attract a significant amount of money exceeding the volume of venture financing, which is a more traditional instrument of financing for innovative business. The purpose of this article is to analyze this financing instrument, and to identify problems and prospects for its development in the short term. The essence of the instrument in question has some similarities with IPO, although, in contradistinction to IPO, investors of ICO do not receive the right to participate in capital and the right to receive dividends. Entrepreneurs are also free from debt obligations. Herewith, the process of issuing tokens is accompanied by a kind of prospectus, and the offering takes place both on the stock exchange and on the over-the-counter market. The short period of existence of this instrument leads to a number of problems, among which the most significant one is the absence of unified regulation in terms of recognition and classification of tokens, licensing, evaluation, auditing etc. However, in the coming years, the demand for this form of financing will be increasing, as shown by econometric analysis.

Keywords: innovative business; ICO; tokens; cryptocurrency; capital; financing (search for similar items in EconPapers)
JEL-codes: F21 F37 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.31107/2075-1990-2019-5-104-118

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