ICOs offer many opportunities as well as a certain amount of risk for both project holders and investors. ICOs enable project holders to finance their ambition by issuing tokens. They present various advantages, including:

• developing new categories of goods and services, which are of particular interest for innovation projects;
• being an alternative source of funding, alongside traditional banking and financial market methods;
• creating a community of holders and users, bound by the specificities of the tokens and the prerogatives they grant;
• granting the issuer significant flexibility in how to frame the token issue, in the absence of current ad hoc single and pre-defined regulatory regimes.

These characteristics are of great interest to both startups and incumbent players, which are convinced that the specifics of ICOs would be a good fit as regards their needs to develop their business and integrate innovation into their models. ICOs present the distinct advantage of raising funds and ensuring the full alignment of interests between the project holder and those financing it, without risking to dilute the ownership of existing shareholders.

Investors also enjoy various advantages, as tokens may generate significant returns. ICOs make it possible to be part of, and share in, the potential benefits of a specific project rather than the whole issuer’s business, while limiting exposure to the risks generated by such specific project. Depending on the project, ICOs may include a higher degree of liquidity compared with certain traditional forms of investment (such as certain collective investment schemes) where investors might be bound by their investment for a specific period of time.

These potential benefits should however be carefully considered in the light of associated risks, which must be properly assessed. Without this list being exhaustive, risks include volatility and liquidity, as well as operational risks on platforms where tokens are traded and cybersecurity risks.