The crypto-industry is witnessing the rise of IEOs in response to the need for alternative project financing methods. An IEO is a token sale where a crypto-exchange facilitates the sale on the issuer’s behalf.
In an Initial Coin Offering (ICO), the investor sends the funds directly to the token issuer. On the other hand, in an IEO the buyer creates an account with the exchange hosting the offering and sends the funds there. The buyer then receives the tokens from the exchange itself. Therefore, the exchange acts as the middleman between the token issuer and the investors.
An IEO offers a number of advantages, such as:
- Tapping into the user base of the hosting exchange;
- Immediate liquidity for the token;
- Requiring a lower marketing budget;
- Affording added confidence to potential buyers since the exchange screens the project before permitting the launch of the IEO;
- Providing added security as the exchange also carries out its own KYC/AML checks on the buyers;
- Buyers can pay for tokens in all the different currencies (fiat and altcoins) accepted by the exchange;
- Eventually listing the token on the hosting exchange will be a natural next step.
A Maltese entity launching an IEO is considered as being an Issuer under the VFA Act (assuming that the tokens classify as VFAs). In this case, the issuer is required to comply with the provisions of the VFA Act.
Our team at E&S Group is able to assist you in launching an IEO and ensuring full compliance with the VFA Act. Contact us for more information!