Coinbase is launching a new platform for primary token offerings, giving retail investors in the United States access to regulated cryptocurrency initial sales for the first time since 2018.
The exchange plans to host about one token sale per month on its new platform, starting with the blockchain protocol Monad, which will launch its native token sale November 17–22.
Token sales will run for one week, during which time users can submit purchase requests. After the window closes, an allocation algorithm will favor smaller buyers first, gradually filling larger orders to ensure broad participation.
The platform will reduce future allocations for users who quickly sell their newly acquired tokens, the company said on Monday.
The platform’s algorithm is designed to facilitate fair distribution and reduce speculative dumping, according to Coinbase.
To participate, investors must hold verified Coinbase accounts and meet the platform’s compliance requirements. Token purchases will lead to USDC (USDC), the dollar backed stableCoin issued by Circle.
Projects launching through Coinbase will face a six-month lock-in period, which prevents founders and affiliates from selling tokens on the secondary market or over-the-counter (OTC) without Coinbase’s approval and public disclosure.
Participation is free for buyers, while issuers pay a fee based on the amount of USDC raised, in addition to any listing costs.
The launch marks one of the first broad opportunities for US retail investors to participate in public token sales in several years.
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The 2017–2018 ICO boom
An initial coin offering (ICO) is a method of fundraising in which a blockchain project sells newly created tokens directly to the public to finance its development.
The funding vehicle took place in 2017 and peep next yearwith token sales raising $13.7 billion in the first half of 2018, more than double the amount collected in the previous year.
Crypto offerings quickly caught the attention of regulators. In 2017, the US Securities and Exchange Commission (SEC) suggested Certain tokens may be subject to US Securities regulation if they meet the requirements for an “investment contract” under the Howey Test.
In 2018, the auditing firm Ernst & Young reviewed 140 major ICOs from the past year and found that 86% of their tokens were trading below launch prices, while nearly a third lost almost all of their value.
The ICO boom faded after 2018 due to mounting regulatory scrutiny, widespread investor losses, and a severe bear market.
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