Is it time to introduce strict ICO regulation?

Recently, Sirin Labs, an initial coin offering (ICO) project that raised $158 million during the bull market of 2017, made the headlines for its controversial pivot from a hardware-based business model to supplying software to mobile phone manufacturers. According to a report released by Bloomberg, nearly a year since the ICO, the company has not been able to generate any profit and its mobile phone called “Finney” was met with underwhelming demand from the market. The project is now facing a serious funding crunch and its capital is set to run out within 6 to 12 months.

Last year, the project secured a mega-round from investors in the public cryptocurrency market to develop a mobile phone that uses cryptocurrencies as its native currency and allows users to trade and utilize digital assets. The vague business model of the company set out to compete against giants like Samsung, Apple, and Huawei in a highly competitive market. At $999, the pricing of the mobile phone of Sirin Labs is right up there with Samsung’s Galaxy series and some of Huawei’s latest mobile phones that are considered to have the best specifications in the mobile phone market. Sirin Labs responded to the Bloomberg report stating that the Google Pixel camera module budget cost around $200 million, implying that the budget was not enough to develop a proper mobile phone.

Regulation cannot force investors to make more intelligent investment decisions, as investors lose out in strictly regulated markets like the stock and real estate markets. But, in some regions like Japan and South Korea, the government has started to restrict ICOs to institutional and accredited investors that have the means to properly evaluate the vision, business model, and scope of a project before engaging in a large funding round.