Exclusive: Why Crypto Exchanges Pursue IEO over STO?5 min read
by Matthew Lam | May 07, 2019
Exclusive interview with Garrett Jin: Part 1
Under the falling ICO market in 2018, security token offerings (STO) are considered as the future of ICO. However, it is notable that projects tend to fundraise via initial exchange offerings (IEO) instead in 2019. Garrett Jin, CEO of BitForex, shares to us why most crypto exchanges pursue IEO over STO in 2019. He also evaluated the competitiveness of Hong Kong and Singapore in fostering crypto exchange business!
IEO has been a hot topic among exchanges recently. The main reason is that it creates opportunities for users to earn profit after their investment. The ICO market is cooling down because people cannot earn profit in the secondary market. There's no reason to invest in ICO now. The IEO provides a lot of profit opportunities for investors. That's the reason it's getting hot. The ICO boom in 2017 led to a bull market, but now it's cooling down. We still had a lot of ICO project galaxies before. For us as an exchange, we are trying to provide the best service for the project partners. This is the reason we started launching IEOs because IEO could help project teams to match with crypto exchanges and I think we should support project teams by serving as a platform for launching IEO. This is my opinion about IEO. Regarding STO, I think it is an innovation. But for us, I think we will move from ICO to IEO first.
Can you share with us more about the Turbo Optimization Platform in screening high-quality projects? How is it compared to Huobi Prime?
We have different rules on how the users can join the Turbo program. From what I noticed, around 3000 people have the chance to buy the token of IEO projects through Huobi Prime, but only 2% of participants can actually purchase IEO in Huobi. They also need to use the Huobi token (HT) to join the IEO, which I'm not against. But this gives extra risk for the investors because they need to hold HT to join the IEO. There are potential risks for users if HT is highly volatile or suffers a price drop. For BitForex we have the first premium project in our Turbo’s platform, which is UND and it turned out quite successful. The UND tokens were sold outin 2 minutes, which users have relatively more time to purchase compared to other IEOs that sold out in few seconds. We set the purchase limit as 15 ETH for each user. This gives more people to have the opportunity to gain from IEO on BitForex.
Garrett shared to us the competitive positioning of BitForex in 2019.
In term of competition among crypto exchanges, it’s heating up in 2019. What's the competitive positioning of BitForex in Singapore? For example, Binance just launched a crypto fiat exchange in Singapore in April. How do you adapt to this fierce competition?
We need to do a lot of things to get adapted to this fast moving crypto world. BitForex is established one and a half year ago and it is relatively new compared to Binance. I think that crypto exchanges need to extend their geographical footprint in order to survive. For example, BitForex is expanding into Russia and Latin America, which these regions have a rapid growth of userbase.
The Monetary Authority of Singapore is seeking regulation on crypto exchanges. What will you suggest to MAS for a comprehensive regulation on crypto exchanges in Singapore?
Firstly, I think the MAS is quite proactive in regulating crypto exchanges compared to other regions. Secondly, I think the MAS is trying to find a way to foster healthy growth of blockchain industry. I think what I would suggest to MAS is to get more involved into this industry and talk to the industry leaders in order to get a comprehensive picture of blockchain industry. I think in Hong Kong, the SFC is doing the sandbox also. They work closely with the exchanges and the project parties. I think the regulators need to work closely with industry leaders to make a more informed decision.
Which place is more favorable for crypto exchange business, Hong Kong or Singapore?
This is a hard question, because making comparison is always hard. For me, Singapore has the opportunity to be relatively more independent because the business policy in Hong Kong can somehow be influenced by China in general. While Singapore is more independent in setting up policies, Hong Kong is closer to the East Asian market, such as China and Korea which located in the heart of Asia. I think Hong Kong and Singapore have their advantages in their own way. The regulation and policy play an important role in crypto exchange businesses: whether the policy is friendly or hostile?; whether crypto exchanges feel secured in doing their business here etc. BitForex came to Singapore for a better policy.