Coinbase (COIN) is introducing a new token sale platform that aims to restart crypto public offerings with protections designed to prevent the problems that plagued the 2017-2018 initial coin offering (ICO) boom.
The new platform will host about one token sale per month, according to a press release Monday, and investors must submit purchase requests during a one-week period for each sale. After that, an algorithm will determine how the tokens are distributed, aiming to avoid a first-come, first-served system and instead create what Coinbase describes as a “broad and fair” allocation.
The first offering will come next week from Layer-1 blockchain startup Monad, the company said.
Token purchases must be made using Circle’s (CRCL) stablecoin, USDC, and only users in good standing who have completed identity verification and compliance checks will be able to participate. The platform will be available to users in most global regions with plans to expand access over time.
In a nod to the failures of previous ICOs — which saw billions raised by projects that often had no working product or oversight — Coinbase said it has built in more investor protection mechanisms. For example, project teams and associated parties will be blocked from selling any of their tokens for at least six months after the public sale. This restriction applies to both private and exchange-based sales.
Coinbase will also scrutinize projects before allowing them to list, assessing criteria such as user interest, founding teams’ track record and token structure, including how tokens are distributed and how long they are locked up.
ICOs peaked in 2017 and 2018, with crypto projects raising billions of dollars by selling tokens directly to the public. While some projects continued to develop working networks, many collapsed or were exposed as scams, drawing scrutiny from regulators and causing platforms like Coinbase to steer clear of the model.
By automating allocation and enforcing post-sale restrictions, Coinbase’s new approach could represent a reset for public token sales, this time with more oversight.
