Most people in the cryptocurrency industry are familiar with the ICO concept. An initial coin offering allows companies to raise money by issuing a native token which may appreciate in value over time. It now seems a new business model has emerged which is known as a JCO. The JOBS Crypto Offering is a very interesting concept, even though it basically boils down to a new ICO token offered to investors through a crowdfunding platform. Equity token sales are definitely evolving as we speak.
Will the JCO Business Model Succeed?
The JOBS Crypto Offering is a new venture for Finova Financial and serves as the “world’s first” equity-linked token. As one would expect, it resembles the initial coin offering model in many ways, although there is a big difference in terms of calculating this token’s inherent value. Rather than using money from crowdfunding as a way to determine the token’s value, it will be linked to a share of equity in Finova.
To be more specific, we are talking about an ERC20 token issued on the Ethereum blockchain that will be traded against cryptocurrencies. However, because every token represents a share of equity in the Finova company, every single JCO token will be backed by assets in a US corporation. In that regard, it certainly appears to be a “world’s first”, although it remains to be seen how the SEC will take to this particular project moving forward.
The JOBS Crypto Offering is officially labeled a “new financing process.” It allows companies to issue securities to the general public in exchange for cryptocurrencies or other funds. All of this is, according to the press release, fully compliant with SEC regulations. Tokens will be listed on an “alternative trading system,” although it remains unclear what that would mean exactly. This seems to indicate that JCO-based tokens won’t appear on any cryptocurrency exchanges in the near future. It seems the parent company wants to align the concept of initial coin offerings with current SEC regulations. The JCO model seems to check all of the right boxes in this regard, as it provides a new way for companies to raise capital using cryptocurrency and crowdfunding.
With its JCO model, Finova hopes to merge blockchain technology and cryptocurrency with a legally compliant form of crowdfunding. It is a rather tall order, and it remains to be determined if this approach can succeed. After all, if this method is fully compliant with SEC regulations, it seems likely to assume that people will not receive any significant profits from holding these tokens as they would with an ICO. Only time will tell whether or not that is the case, though, as we haven’t seen any similar projects in the past.
It is commendable to see companies explore new opportunities in a regulated manner. ICOs are presently on the SEC’s radar, mainly because most of them do not comply with existing securities regulations. The JCO model, on the other hand, seems to do just fine in that regard, but it may not attract the wild speculation that we’ve seen with traditional ICO projects. Whether or not that is a positive development remains to be determined. Having an ERC20 token backed by a US company’s assets is an interesting concept well worth keeping an eye on.