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ICO 2.0: IEO, the Initial Exchange Offering, is gaining popularity

Jun 10, 2019


Better Research, Better Investments.Better Research, Better Investments.
Better Research, Better Investments.Better Research, Better Investments.


The Anatomy of an IEO


  • The market for ICOs is dead, WSJ reports, but there is a new way funds are being raised: IEOs or Initial Exchange Offerings
  • The rebound in cryptocurrencies recently sparked interest from both entrepreneurs and investors with IEOs being the preferred route for raising funds for digital tokens
  • In an IEO, a crypto exchange acts as an intermediary in the sale of the digital tokens
  • The crypto exchange that is facilitating the sale researches the digital token and decides if it is worth listing on its exchange
  • An IEO differs from an ICO in that an ICO is sold directly to final customers, not involving an exchange
  • About $518 million has been raised through IEOs this year, according to TradeBlock
  • In an IEO, the exchange acts as an investment bank would in a stock IPO, usually producing an outline of the digital token that resembles, somewhat, a prospectus
  • Also like an IPO, the exchange collects a fee for its work on an IEO
  • Critics contend that IEOs embody all of the same problems that ICOs while concentrating more power in the hands of these exchanges
  • Proponents say IEOs are better because exchanges run reputational risks if IEOs don’t go well; incentives are aligned, exchanges do not want to negatively affect their business with rotten deals
  • Critics retort these are unregulated exchanges that have had a litany of troubles from hacks to fake trading volume
  • Most IEOs have taken place on exchanges outside the United States as the SEC has already taken action against some players trying to market them in the US