Digital currency investors should be on the lookout for a new token from venture capital fund Blockchain Capital. The firm will raise funds through the creation and sale of a blockchain-based token called “BCAP,” according to CoinDesk. The company plans to initiate the sale via an ICO, and tokens will represent shares of a new fund that is being created and which will be called Blockchain Capital III Digital Liquid Venture Fund, LP. This type of token sale is a first for venture capital funds and represents the latest in a trend among token creators. What is behind this trend and what does Blockchain Capital hope to gain from this venture?
Terms of the ICO
Blockchain Capital revealed to the public that it would sell the BCAP token via an ethereum-based contract. This constitutes the third effort to raise funds for Blockchain Capital, with the most recent attempt being a $13 million project to generate funds for a new project with a focus on bitcoin and blockchain startup efforts. The ICO will come alongside other traditional efforts to raise funds as well.
Aside from The DAO, the ICO by Blockchain Capital is the first project of its kind. It constitutes the latest in a number of token sales which have so far been highly controversial. Proponents of the token model believe that it can unlock new sources of capital, while detractors believe that it is especially prone to fraud, mismanagement, and other potential pitfalls.
Tokenizing a Security
Blockchain Capital managing partner Brock Pierce indicated to CoinDesk that his company’s ICO would assume a different approach from other recent token sales. “We’re a security just like someone doing a big crowdfunding campaign, but we’re tokenizing that security. The difference is everyone else is trying to circumvent these regulations,” he said. Blockchain’s token will be registered in Singapore and U.S. regulations. To Pierce, the critical distinction is that many ICOs attempt to avoid characterizing themselves as securities, as this can bypass certain types of regulation. Pierce and his firm are readily agreeing that their ICO is a security and willing to abide by regulatory measures. In addressing legal questions head-on, Blockchain Capital believes that its token sale will give potential investors better access to information about risk, providing a more transparent process and, hopefully, better access to capital.
The token fund will also aim to contribute higher levels to liquidity to the venture capital world. In this area, funds are often able to create solid returns, but those returns often require a long-term investment of five to 10 years. Tokens allow for easy buys and sells and can thus open the door to a variety of other asset classes.