Cryptocurrency initial coin offerings (ICOs) will become a significant fundraising route for companies seeking growth capital in the next five years, coming to represent over 10 per cent of all capital raised in the UK, according to results of a new survey by the law firm Collyer Bristow.
Over half (57 per cent) of respondents, comprising investment managers, fintech entrepreneurs and business owners, believe that start-ups will turn to ICOs in increasing numbers as they look for alternatives to more traditional capital raising methods like private equity and venture capital.
They anticipate that at least 10 per cent of capital will be raised by this route by 2023, and that the UK is well-placed to benefit from the trend, with 60 per cent of respondents saying the City of London could become the primary market for ICOs in the next five years.
The vast majority (83 per cent), however, believe the UK needs to introduce tougher regulation to the sector to ensure its success, while only 3 per cent believe that ICOs can ever replace private equity completely.
Nigel Brahams (pictured), partner at Collyer Bristow, says: “Our research suggests that we are witnessing a small revolution in how start-ups go about growing their businesses. However, regulation remains a concern, and many companies we speak to want greater clarity from the FCA, which to date, although broadly supportive of new technology (i.e. through the sandbox), has only provided a limited steer as to how they should be viewed through the regulatory lens.
“We would like to see the expansion of light touch regulation in this space, so as to support the legitimacy of ICOs. Indeed, we would like to see the City of London become the global leader in this type of capital raising.
“ICOs are unlikely to replace private equity or venture capital. But cynics should be in no doubt that, much like the disruptive technologies of the dot com boom 20 years ago, they are here to stay.”
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