Coinbase launches new platform for primary token offerings, giving retail investors in the United States access to regulated initial cryptocurrency sales for the first time since 2018.
The exchange plans to hold approximately one token sale per month on its new platform, starting with blockchain protocol Monad, which will launch its native token on sale November 17-22.
Token sales will last for a week, during which users can submit purchase requests. After the window closes, an allocation algorithm will favor smaller buyers first, gradually fulfilling larger orders to ensure broad participation.
The platform will reduce future allocations for users who quickly sell their newly acquired tokens, the company announced on Monday.
The platform’s algorithm is designed to facilitate fairer distribution and reduce speculative dumping, according to Coinbase.
To participate, investors must have verified Coinbase accounts and meet the platform’s compliance requirements. Token purchases will be settled in USDC (USDC), the dollar-backed stablecoin issued by Circle.
Projects launched through Coinbase will be subject to a six-month lock-up period, preventing founders and affiliates from selling tokens on secondary markets or over-the-counter (OTC) without approval and public disclosure from Coinbase.
Participation is free for buyers, while issuers pay a fee based on the amount of USDC collected, in addition to the registration fee.
This launch marks one of the first major opportunities for US retail investors to participate in public token sales in recent years.
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The ICO boom 2017-2018
An initial coin offering (ICO) is a fundraising method by which a blockchain project sells newly created tokens directly to the public to fund its development.
The funding vehicle took off in 2017 and peaked the following year, with token sales raising $13.7 billion in the first half of 2018, more than double the amount raised in the previous year.
Crypto offerings have quickly attracted the attention of regulators. In 2017, the United States Securities and Exchange Commission (SEC) suggested that certain tokens could be subject to U.S. securities regulations if they met the requirements of an “investment contract” under the Howey test.
In 2018, auditing firm Ernst & Young analyzed more than 140 large ICOs from the previous year and found that 86% of their tokens were trading below launch prices, while almost a third had lost almost all of their value.
The ICO boom faded after 2018 due to increasing regulatory scrutiny, widespread investor losses, and a severe bear market.
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