As regulators around the world continue to struggle to formulate an appropriate regulatory framework for cryptocurrencies such as bitcoins and ethereum, a new avatar of blockchain-based financial products—cryptocurrency/crypto-token powered initial coin offerings (ICO)—is gaining popularity as a viable alternative to more traditional means of raising capital. The emergence of a new technology-based means of raising capital will need to be properly regulated in order to streamline investment and ensure adequate investor-protection safeguards. An ICO is largely similar to an initial public offering, but it differs to the extent that instead of offering shares in a company, cryptocurrencies or crypto-tokens are offered at a predetermined rate. In order to streamline and regulate ICOs in India, there are legal and regulatory challenges that need to be addressed. As a crucial first step, it is recommended that a regulatory sandbox approach is followed to develop laws that achieve synergy between new technology, investor protection and effective regulatory oversight. If such an approach is followed, it may lead to greater innovation and investment in India.

(Live Mint)