Initial coin offering

An initial coin offering (ICO) or token sale is a form of capital raising in which a project issues and sells digital tokens using blockchain technology, typically in exchange for cryptocurrency or fiat currency. The tokens may grant access to a product or service, represent participation rights within a network, or function as speculative digital assets traded on cryptocurrency markets.

ICOs emerged in the mid-2010s as a method of financing technology ventures, particularly blockchain-based projects, without relying on traditional intermediaries such as venture capital firms or public equity markets. Depending on their structure and characteristics, tokens offered in ICOs may be treated as securities or fall under other regulatory frameworks, and regulatory treatment varies widely across jurisdictions. Some countries have imposed restrictions or bans on ICO activity, including China, which prohibited domestic token offerings in 2017.

ICOs are typically conducted online and can raise funds globally without the involvement of traditional financial intermediaries.

The rapid expansion of ICO markets between 2016 and 2018 was accompanied by significant investor losses, project failures, and enforcement actions related to fraud and unregistered securities offerings. Regulators and international financial institutions have since emphasised investor protection, disclosure requirements, and the application of existing securities laws to many token offerings.

In 2023, the Swiss Financial Market Supervisory Authority (FINMA) concluded that the Dohrnii Foundation's DHN token qualified as a security because the associated platform was not yet operational at the time of its ICO. The decision has been described as the first and only publicly known case in Switzerland and Europe in which a pre-functional ICO token was classified as a security, despite ICOs generally being conducted to raise capital for the development of blockchain platforms before they become operational. The decision led to discussion about the interpretation of FINMA's ICO guidelines and contributed to legal uncertainty regarding the regulatory classification of pre-functional ICO tokens in Switzerland.