Cryptocurrency analyst. Founder and editor at btcpeers.com
The current push for DeFi has not only changed the way we engage with our everyday financial needs but has also introduced new means of accessing, supporting, and investing in new projects. Tagged as Initial DEX Offerings (IDO), the possibility of bypassing restrictions when identifying and investing in projects has improved crypto funding. However, this does not mean that other models of crowdfunding have become redundant. For what is worth, Initial Exchange Offering (IEO) is still the go-to option for projects that prefer to capitalize on established launchpads and introduce a more diverse array of crypto products not necessarily restricted to the financial sector.
It goes without saying that despite the surge in the activities generated in the DEX market, centralized exchanges are still core components of the emerging crypto industry. This notion rests on the fact that digital asset exchanges provide regulated and trusted gateways to the crypto market, where investors can seamlessly engage in highly profitable funding schemes without having to worry too much about the security and integrity of featured projects. Hence, IEO will remain an integral contributor to the growing crypto landscape even as regulators continue to legitimize this variant of token sale mechanisms.
While exploring the relevance of IEO, I decided to seek the view of one of the stakeholders of the current IEO market in the person of Kiana Shek, CXO of DigiFinex. It is easy to see why DigiFinex has become one of the most revered crypto enablers. The crypto exchange offers its services to over 4 million users and, in the process, has established itself as a dependable platform for crypto traders and investors alike.
During my interview with Kiana, we discussed the current state of funding in the crypto industry as well as the role of exchanges in proliferating the IEO model. Below is an excerpt from the interview.
Andrey Sergeenkov: What is your view on the current state of crowdfunding and the many models available to crypto startups?
Kiana Shek: Cryptocurrency startups rely heavily on crowdfunding to raise seed capital. Common crowdfunding methods currently include ICO, IEO, STO, IWO, and IDO on DEX like Uniswap. Among which ICO is still the most common practice in the market, for now there has been an estimation of nearly $30 billion USD raised from the adoption of smart contracts and ICO crowdfunding. With the booming development of DeFi this year, IDO has starting to become one of the most popular crowdfunding methods for cryptocurrency startups.
However, the crowdfunding method selected by cryptocurrency start-ups is oftentimes closely interrelated to the regulations of the country in which it is located. So revision of crowdfunding regulatory regulations usually hold a closer connection with cryptocurrency start-ups. As time goes by, in order to meet the needs of market expansion, governments have been refining the regulatory requirements for crowdfunding.
For example, take the United States as one of the countries with the strictest regulation on cryptocurrencies, Securities and Exchange Commission (SEC) has revised its initial capital raising rules at the beginning of this month, to raise the bar on capital for crowdfunding regulations from 1.07 million USD to 5 million USD, simplified and improved the securities issuance exemption framework stipulated in the Securities Law, making the fundraising process more efficient. This may be beneficial to the issuance of security tokens (STO) too, meaning that cryptocurrency startups can directly crowdfund $5 million from investors through tokens, thereby reducing their dependence on risk capital.
Andrey Sergeenkov: How does IEO compare to IDO? Does the proliferation of IDO sideline or jeopardize the relevance of IEO?
Kiana Shek: Compared with IEO, IDO is also another good option for projects to cold boot. IDO can accumulate popularity and attention in a short period of time, it uses issued tokens to reward DeFi with liquidity and rely on the market dynamics to anchor and capture token value. It is also relatively fair to users, because everyone is basically at the same starting line when mining starts. It can be said that IDO has opened another token distribution model with lower threshold. IEOs are generally circulated and withdrawn in centralized exchanges (CEX), while IDOs can complete the token listing work through the market and realize circulation and withdrawal in DEX.
The expansion of IDO is closely related to the vigorous development of DeFi this year, and the popularity of DeFi is also intersected to the background of the world’s beginning into the era of negative interest rates. DeFi is helping to shift the focus on fiat currency to digital currency. The current DeFi lock-up funds have exceeded 12 billion USD. But looking from a macro point of view, the cryptocurrency industry is still in development. The relationship between IDO and IEO is not an all-or-nothing relationship, but a synergistic and complementary relationship between the two to jointly move the world in front of banknotes and traditional currency, and co-construct an advanced and prosperous ecosystem for digital currency. With IDO still needing time to mature and refine it’s mechanism, IEO will continue to be the mainstream method for token issuance.
Andrey Sergeenkov: Like the majority of players in the exchange market, DigiFinex has its in-house launch pad called Apollo. Can you tell us more about this service?
Kiana Shek: The DigiFinex Apollo Project is a platform that provides one-stop listing services for high-quality projects around the world on DigiFinex, especially for our very own token DFT. In addition to helping high-quality projects to raise funds, the Apollo project places emphasis on helping projects to carry out integrated marketing and assist projects to garner attention and promote the brand in a short period of time. On the whole, the Apollo project aims to incubate high-quality projects through DigiFinex's resources, and contribute to build a more holistic cryptocurrency industry ecology.
Andrey Sergeenkov: Since the launch of Apollo, how many projects have benefitted from DigiFinex’s IEO services, and what is the success rate so far?
Kiana Shek: At present, we have successfully launched sixteen projects, and each project has achieved the predetermined fund-raising target. More importantly, we have helped the Apollo project to realise their objective in acquiring a large number of users and investors,obtaining massive amounts of media exposures and building a good reputation for projects.
Andrey Sergeenkov: What are the criteria used to handpick crypto startups?
Kiana Shek: DigiFinex only selects high-quality blockchain projects to cooperate. At the same time, we pay great attention to security and hence we have a relatively strict review process. For projects that apply for listing on DigiFinex, our team will first consider the background of the project team, the number and activity of community users, on-chain data, it’s regulation status, application data, project planning, private placement and circulation, media reports, and whether there has been negative news, etc. to evaluate if the project is qualified, and meets all the criteria in order to be selected.
We are committed to providing customers with a "fair and transparent" trading environment. All projects that are qualified with our standards will be monitored through our real-time risk control system to keep aware of the project's market performance. Furthermore, we have a strict delisting mechanism that protects the interests of our users, and jointly maintains the ecological balance of the global digital asset market.e have strong media resources and community foundations that can complement the project. Among them, DigiFinex AMA, as a well-known live interview column in the industry, has had the opportunity to interview with many big names in the field, including Roger from BCH, CEO of Simplex, and CEO of Australian Securities Exchange etc.
Andrey Sergeenkov: DigiFinex recently partnered with HollyGold as the latest beneficiary of its advanced suites of Apollo services. Can you tell us more about this project?
Kiana Shek: Of course. DigiFinex's ongoing Apollo 16th project, Hollygold (HGOLD), is a technology company invested and founded by the famous Hollywood film investment financier Kevin Robl and Taiwanese blockchain godfather Dior Wu. HollyGold is also the strategic partner of Base FX and Production Capital, renowned production houses in Hollywood. HollyGold (HGOLD) team members and Hollywood film industry professional consultants have co-produced up to 1,600 films, including Oscar and Emmy award-winning films and many blockbusters. Through its co-founder Kevin Robl, Base's vice president Poli Liang, HollyGold has imported a great amount of Hollywood resources, and signed cooperation agreements with a number of film companies on investment, post-production, copyright, circulation, application scenarios, exhibitions and different kinds of activities, embarked on a bright future of many potential cooperation.
Dior Wu, the founder of HollyGold, is a believer and practitioner of chain reform. He has invented digital currency encryption cards and smart vending machines dedicated for this industry, and applied patented technology to the HGOLD project. The establishment of HGOLD is to utilize blockchain technology to get deeply involved in the production and distribution of the film industry, to transform the Hollywood film ecology and solve the problems in the industry. HGOLD is a multi-purpose digital currency designed for the film and television ecosystem. The sale of HGOLD encryption cards through vending machines lowers the investment threshold for ordinary people, and helps them to attain the opportunity to participate in the production and distribution of Hollywood movies with a simple gesture, co-share the benefits brought by investment from these productions.
Recently, HollyGold has participated in the production of 12 upcoming Hollywood blockbusters, including " Willy’s Wonderland " starring Nicholas Cage, the animated feature film "Lord of the West", and "Recharge", whose executive producers are no one but Keanu Reeves, and the screenwriter of the "Fast & Furious" series. In addition, HollyGold has become a sponsor of TCL Chinese Theater in Hollywood and Sugar Factory, a local landmark restaurant in Hollywood.
Andrey Sergeenkov: I believe that this project is the latest attempt to introduce crypto to the buzzing scene of the film and entertainment industry in America. How is HollyGold different from the previous attempts to achieve this?
Kiana Shek: Before the establishment of HollyGold, there have been other projects attempting to adopt movie themes as the background of the proposed tokens, but there were no successful cases. However, since HOLLYGOLD was founded, there were huge Hollywood resources to support it with its global influence. HollyGold has formed a global consensus that is unmatched; and COVID-19 has also brought in a new lifestyle that made room for HGOLD to start out.
The advantage of HollyGold lies in having BASE special effects post-production company as their most significant strategic partner, as well as TCL Chinese Theater. With the promotion from Hollywood stars and influencers, a strong Hollywood film consultant team, and the support of well-known Hollywood companies, such as Wolfe Air, Sugar Factory, etc., these related companies could all use HGOLD for commercial transactions in the future. All the resources mentioned above are exclusive to HollyGold, which is why it will not be easily replaced, let alone be surpassed.
On the other hand, HollyGold could adopt Dior's blockchain patented technology to carry out unlimited cross-border cooperation with various industries. They have successfully used HollyGold to purchase the famous Balloon Dog artwork by modern artist Jeff Koons. In the authoritative global film database IMDb, it can be found that HollyGold has invested in five Hollywood movies till now including "Willy’s Wonderland", "In Harm’s Way", "Lord of the West", "Wish Dragon 2" and "Recharge".
One of HollyGold's important partners, the Hollywood professional tracking photography company Wolfe Air, has promised to use HollyGold as a payment currency for aircraft rental. Moreover, The global Marvel Animation Exhibition to be held next year has confirmed to only adopt HollyGold as the transactional currency for purchasing commercial goods. We can see that HollyGold has created a blue ocean of digital currency for film and television, and we see great potential for HollyGold.
Andrey Sergeenkov: How can investors capitalize on this opportunity, and what are the rewards packaged for active participants of the ongoing funding campaign?
Kiana Shek: The participants for this limited token sale on DigiFinex are getting the greatest discount, as the private sale price is 3.2 USDT and the subscription price of this token sale is in between 2 USDT and 2.7 USDT. The token sale was a big success, with over 5.6k investors participating and over $4million raised in total. If investors have missed out on the token sale, they can always invest in HGOLD on DigiFinex, which currently has listed HGOLD exclusively.
Andrey Sergeenkov: Recent news reveals that the Securities Commission in Malaysia has moved to introduce guidelines and regulate IEOs. Do you expect other regulators to do the same?
Kiana Shek: According to SCM, the regulatory rules on IEO are designed to promote “responsible innovation in the field of digital assets while managing emerging risks and safeguarding the interests of issuers and investors”.
The digital currency industry is still at its toddler stage. The Securities Commission of Malaysia has issued an IEO regulatory guidelines. I think this is a good policy for both exchanges and investors, and will also serve as an example to promote the sound development of the entire cryptocurrency industry. On the one hand, the government has approved the issuance of cryptocurrency through legislation and has established norms for the industry; on the other hand, it can better protect the interests of issuers and investors, and could effectively prevent illegal and criminal activities such as money laundering through cryptocurrency. I am very much looking forward to other countries issuing similar policies soon.
Andrey Sergeenkov: What are the implications of a more regulated IEO market?
Kiana Shek: The implementation of compliance policies may stimulate more small and medium-sized companies to try to raise seed funding through this method. On the whole, it is beneficial to a healthy and sustainable development of the industry.
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