“Cryptocurrency” became a major buzzword in 2017. Suddenly, all eyes were on these new assets with speculators jumping into the market in droves and regulators heavily scrutinizing them.
In fact, in early December, the combined market capitalization of all digital currencies surpassed that of JPMorgan, the biggest U.S. bank. Initial coin offerings (ICOs) similarly exploded, raising hundreds of millions of dollars around the world in a matter of months.
While they made for exciting headlines, though, I expect the exuberance around ICOs to fizzle in 2018.
What’s more, I also expect regulators and authorities worldwide to come down hard on fraudulent ICOs in the new year. That’s because many ICOs skirted existing regulation in order to raise equity — with no solid business to back up the offering. Funds raised from some of these ventures have already started to disappear, and regulators, such as the SEC, recently announced that they’re getting ready to crack down on them.
I wouldn’t be surprised to see hefty fines, litigation and even jail time for those standing on the wrong side of the ICO issue.
Beyond the regulatory crackdown, questions will arise around the utility of special-purpose tokens. Why would a file hosting company accept payment in Filecoin, when a general-purpose digital asset is so much more liquid and therefore easier to turn into fiat?
We don’t use different currencies to buy clothes or pay our mortgage in the brick-and-mortar world and ICO token holders will realize the economics are no different online.