On behalf of the Swiss Fund and Finance Platform, the authors seek to find out the economic and regulatory framework as a basis of an initial coin offering (ICO). With this thesis, the authors aim to analyse the new financing method ICO upon different criteria: definition, process, implementation, opportunities and risks, success factors, comparison to traditional equity financing, legal framework and case studies / best practice examples.

The authors shall establish an empirical approach and provide a better understanding of the cryptocurrency market. Secondary data shall be examined to define the terminology used in this thesis, evaluate the characteristics of such an ICO as well as provide a market overview through the best practice analysis. Moreover, the regulatory framework shall provide insights into the surrounding regulations and future outlook of ICOs. This thesis is based on secondary data - books, articles, journals and company reports are considered as a basis for discussion. The data collection is mainly based on English and partly on German. Moreover, the substantiation of legal codes is required. Given that, this research primarily makes use of the regulatory frameworks of each country analysed. For that, the authors refer to press releases of the International Organization of Securities Commission (IOSC) and the Bank for International Settlement (BIS).

Initial Coin Offerings represent a profitable alternative to the traditional forms of equity financing for raising new funds for a new venture. Although Initial Coin Offerings can prove to be very successful, they also raise the risk potential for scam exploitations. If we consider the opportunities and risks of an Initial Coin Offering, it is probably best to refer to the common saying of “the higher the return, the higher the risks”. The Initial Coin Offering allows from both perspectives – venture and investor – to rapidly form capital with lower transactions costs respectively to receive large returns with a smaller initial investment amount. Due to the absence of an accepted regulatory framework, the access and transfer of liquidity occurs in fastest time. Barriers are no longer present, and the wide scope allows almost anyone to participate in this particular field of business. However, as mentioned previously, Initial Coin Offerings also present various challenges. The absence of a centralized intermediary or regulatory institution impedes investors from receiving full information about the project and in many cases, ignores the due diligence obligations. The constant changes in and the uncertain future about Initial Coin Offerings leave a spectrum of uncertainties and inexperience among investors and employees behind. With around 1000 Initial Coin Offerings being simultaneously launched, the competition is intense. New ventures must be able to bring about a competitive advantage and find several methods to differentiate themselves from competitive Initial Coin Offerings.