The Increasing Importance of Initial Exchange Offering (IEO)

Published : Sep 22, 2019

Initial Exchange Offering

  • The Initial Exchange Offering is the new method of raising funds for your business idea in the crypto market. It is gradually attracting the interest of traders across the world. It can be called an alternative to STO and ICOs, which essentially acts as an intermediary between projects and contributors.

    What is IEO (Initial Exchange Offering)

    Technically, an IEO campaign is another form of ICO. The key difference between them lies in where and how the security is offered to investors. As identical with its name, an IEO enables token offering by partnering with an exchange platform, rather than directly distributing them among investors. While a public ICO enables anyone to participate in the offering, in an IEO only members of that particular exchange platforms can invest in tokens. Rather than following specific steps of an ICO campaign, the project team can follow an IEO’s standard procedure for buying and storing tokens from that particular exchange. In many ways, it standardizes the process of token offering as the exchange sets the terms of purchase.

    How it is different from ICOs

    Coins were often sold through an ICO with promises that users can avail and trade them later on exchanges. In many cases, tokens offered through an ICO were never listed on exchanges.

    When buying tokens through an IEO, users rely on the fact that the given exchange has done some due diligence and is launching a coin believing it has a future. Also, it’s in an exchange’s best interest to not damage its customer base by issuing dodgy tokens. What’s more, users like undergo know-your-customer (KYC) and anti-money laundering (AML) checks, depending on the exchange's sign up requirements. It adds an extra layer of investor protection and prevent unauthentic investors to participate in offerings.

    Enhanced Listing Process

    In Initial Exchange Offering, the cryptocurrency exchange platform must list the token once the sale has ended. It is the end goal of most of the project teams at the time of coin offering to list tokens on established exchange platforms. Getting listed on the reputed exchange means improved liquidity and credibility to the project while increasing the value of a token.

    Simplified Compliance and Usability

    Startups issuing tokens can gain significant benefits by launching them through IEOs. Token issuers can avail advantages of the exchange platforms' customer base to attract more contributions to projects. In IEO, token issuers don’t need to manage AML/KYC process for verification. Exchange platforms vet IEO participants using their standards for AML/KYC compliance.

    Improved Legal Protection

    Exchange platforms often employ organized legal structures which protect startups from failing to adhere to any regulatory requirements. It saves money for potential startups by eliminating the need to obtain legal resources. Also, established exchange platforms provide legal advice, clarity and a legal team to assist startups in complying with regulations.

    Conclusion: The Future of IEOs?

    The initial exchange offering (IEO) is a comparatively new method of raising funds for your business idea in the crypto space. However, it continues to grow with time. It might help to make crypto-currencies and exchanges more appealing to the wider market. With time, the IEO may change the face of crypto-banking at both national and international level.

    Explore our STO development services that enable businesses to crowdfund their idea and join a global pool of investors.

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