Token Fundraising After the ICO Boom: Market Evolution and Global Regulation, 2019–2026

Key Findings

• ICO fundraising fell from a tracked peak of approximately $7.5 billion in 2018 to $370 million in 2019, a decline of roughly 95% in one year.[1]
• By 2020, only 14 ICOs were recorded, raising $55.6 million combined. ICOs had effectively ended as a dominant fundraising method.[1]
• Two successor models filled the gap: Initial Exchange Offerings (IEOs), conducted on centralized exchange launchpads, and Initial DEX Offerings (IDOs), conducted on decentralized protocols. As of 2024, IDOs account for 74.5% of all public token sales; legacy ICOs account for 7.3%.[2]
• The collapses of Terra/Luna (May 2022) and FTX (November 2022) caused private crypto venture funding to fall 77% in H2 2022 relative to H1. Total crypto fundraising hit a three-year low of $9.7 billion in 2023.[3][4]
• The European Union’s Markets in Crypto-Assets Regulation (MiCA, Regulation EU 2023/1114) became fully applicable on December 30, 2024, the first comprehensive regulatory framework for token issuers and crypto-asset service providers in any major jurisdiction.[5]
• The Financial Stability Board’s July 2023 global framework for crypto-asset activities, adopted by the G20, set the international baseline: same activity, same risk, same regulation.[6]

The ICO Decline (2019–2020)

The ICO boom of 2017–2018 ended faster than it began. In 2017, 875 ICOs raised approximately $6 billion. In 2018, 1,253 ICOs raised around $7.5 billion, the tracked market peak.[1] By 2019, only 109 ICOs were published, raising $370 million. By 2020, the number had collapsed to 14 ICOs and $55.6 million raised.[1]

Note on methodology: The $7.5 billion figure for 2018 reflects ICOs tracked by dedicated aggregation platforms such as ICObench. Broader industry estimates (aggregating all token-related fundraising including private pre-sales) put the 2018 total significantly higher. Crunchbase and the Wall Street Journal estimated $4.9 billion raised through ICOs in 2017 alone, and approximately $33.4 billion across all token-based fundraising in 2018.[1] These discrepancies reflect different definitions of what constitutes a completed ICO. This article uses platform-tracked figures as the more verifiable baseline.

Fraud at scale. A February 2018 analysis by Satis Research Group of more than 1,500 ICOs (the first systematic classification of ICO project quality at scale) found that 78% were outright scams, defrauding investors of approximately $1.3 billion.[22] The highest-profile cases included Bitconnect ($2.6 billion), Pincoin ($660 million), and ACChain ($60 million).[1] A separate study of 3,392 completed ICOs found that success rates, which had been near 90% in early 2017, dropped to under 50% by late 2017 and approximately 30% by Q4 2018.[1] Academic analyses of ICO cohorts from 2016 to 2018 found that the majority of projects had ceased active development within 12 months of their token sale.[22][1]

Regulatory enforcement. The SEC began pursuing ICO issuers following its July 2017 Report of Investigation on The DAO, which concluded that certain digital tokens offered in ICOs could qualify as securities under federal law.[7] Enforcement accelerated after the September 2019 settlement with block.one, which paid a $24 million civil penalty for its $4 billion EOS ICO without registering the offering.[8]

On October 11, 2019, the SEC filed a complaint against Telegram Group Inc., alleging that its 2.9 billion Gram tokens (sold to 171 initial purchasers worldwide to raise capital for the Telegram Open Network, or TON) constituted unregistered securities under Sections 5(a) and 5(c) of the Securities Act of 1933.[9] On March 24, 2020, the U.S. District Court for the Southern District of New York issued a preliminary injunction blocking token distribution, finding the SEC had shown a substantial likelihood that Telegram’s sales were part of a scheme to unlawfully distribute tokens to the secondary public market.[9] On June 26, 2020, the SEC announced a final settlement: Telegram returned $1.224 billion to investors, paid an $18.5 million civil penalty, and agreed to notify SEC staff before participating in any digital asset issuance for three years.[9]

New models competing for the same capital. Even among legitimate projects, ICOs were structurally disadvantaged compared to emerging alternatives. ICOs relied on trust in the founding team without exchange vetting, third-party auditing, or built-in secondary market liquidity, conditions that became untenable as investor losses mounted.[1][10]

The DeFi Shift and the Rise of IDO (2020–2021)

While the traditional ICO market contracted, a parallel infrastructure was building on Ethereum that would produce the next wave of token launches.

In the summer of 2020 (widely called “DeFi Summer” in the industry), the lending protocol Compound introduced liquidity mining: users who supplied capital to Compound’s lending pools received COMP governance tokens as rewards.[^11] This solved what had been the core bootstrapping problem for decentralized protocols: attracting early liquidity without selling tokens directly to investors. Liquidity mining distributed billions of dollars worth of new tokens to network participants over the following months.[11] Uniswap, following a similar model, saw its liquidity grow 6x after it launched the UNI token in September 2020.[11][25] The model spread rapidly across the DeFi ecosystem.

Alongside liquidity mining, a new token launch format emerged: the Initial DEX Offering (IDO). Instead of selling tokens on a project’s own website (ICO) or through an exchange’s launchpad (IEO), IDOs seed token pairs directly into automated market maker (AMM) liquidity pools on decentralized exchanges, allowing for permissionless, immediate trading at launch.[12]

The practical difference between the three models:

• ICO: direct sale from project to investor, no exchange involvement, no built-in secondary liquidity, trust-based.[1]
• IEO: centralized exchange (Binance, OKX, KuCoin) vets the project, manages the sale, provides immediate trading.[12]
• IDO: tokens seeded into a DEX liquidity pool at launch; decentralized, permissionless, susceptible to front-running by arbitrage bots.[11]

The IDO format’s front-running vulnerability became apparent in July 2020 when bZx launched an IDO using a bonding curve: within the first 60 seconds of trading, a flash-borrowing bot extracted approximately $500,000 in profit as the token price spiked 12x out of the gate.[11][26]

The IDO format still captured the largest share of the token sale market through the 2021 bull run. Launchpad platforms (Binance Launchpad, OKX Jumpstart, KuCoin Spotlight, DAO Maker, Polkastarter, and Seedify) organized structured retail access to both IEO and IDO sales.[3][12]

ICObench data across 4,554 public token sales from 2014 to 2023 shows IDOs captured 66.1% of all public token sales; ICOs accounted for 18.4% and IEOs for 15.5%.[1] More recent CryptoRank data tracking 2,275 sales places IDO market share at 74.5%, IEOs at 18.2%, and ICOs at 7.3%.[2]

Market Correction: Terra/Luna and FTX (2022)

Two collapses in 2022 ended the bull-market fundraising environment and accelerated global regulatory responses.

Terra/Luna (May 2022). TerraUSD (UST) was an algorithmic stablecoin that maintained its dollar peg through a mint-and-burn mechanism with its sister token, LUNA, rather than through fiat reserves.[13] UST’s Anchor protocol attracted capital by offering approximately 20% annual yields on deposits.[4] In May 2022, UST lost its dollar peg. The resulting sell pressure on LUNA triggered a death spiral: LUNA’s price collapsed, destroying the mechanism that stabilized UST, which drove further LUNA minting and selling. Both tokens lost nearly all value within days. The FSB noted in its 2023 framework report that the collapse demonstrated the inherently ineffective stabilization mechanisms of algorithmic stablecoins.[6] The contagion reached the crypto hedge fund Three Arrows Capital (3AC), which had significant LUNA exposure, triggering cascading failures at lenders and trading desks including BlockFi, Voyager, and Genesis Capital.[4]

FTX (November 2022). In November 2022, reporting revealed that Alameda Research (the trading firm controlled by FTX CEO Sam Bankman-Fried) held a balance sheet heavily composed of FTX’s own illiquid FTT exchange token.[4] When Binance announced it would sell its FTT holdings, a bank run began on FTX. The subsequent investigation found that FTX had commingled customer deposits with Alameda’s trading operations in violation of its own terms of service.[4] FTX filed for bankruptcy. Chainalysis later counted $8.7 billion in creditor claims against FTX in its 2022 illicit transaction data, following Bankman-Fried’s fraud conviction.[13]

The market effects were rapid and severe. Private crypto venture funding fell 77% in H2 2022 compared to H1.[4] The number of projects raising rounds exceeding $50 million dropped from 146 in 2022 to 33 in 2023.[3] Total crypto fundraising in 2023 hit a three-year low of $9.7 billion across 1,189 rounds.[3] Spot trading volumes on decentralized exchanges in Q2 and Q3 2023 fell to their lowest levels since 2020.[3] Total Value Locked in DeFi protocols fell sharply in mid-2022 and remained depressed throughout 2023.[13]

The 2022 events also ended the growth-at-all-costs fundraising dynamics of the previous cycle. Venture investors began requiring evidence of viable business models and sustainable cash flows before committing capital.[4]

Recovery and Market Maturation (2023–2026)

Private fundraising recovered before public token sales did. Monthly private funding (including venture rounds) climbed from $870 million in June 2024 to multi-billion-dollar months throughout 2025, peaking around $8.6 billion in late 2025.[2] Public token sales (IDOs, IEOs, ICOs) recovered more slowly: monthly public sale volumes remained below $100 million for much of 2024 and early 2025 before a breakout to $654 million in March 2026.[2]

New distribution models emerged to address the main flaw of the 2021 liquidity mining wave: high token incentives attracted short-term capital that exited as soon as rewards declined.[14]

Protocol Controlled Value (PCV). Rather than renting liquidity from external providers, protocols developed mechanisms to acquire and own their liquidity permanently. Olympus DAO, launched in March 2021, pioneered “bonding”: users permanently sell assets (DAI, ETH, LP tokens) to the protocol treasury in exchange for discounted native OHM tokens subject to a vesting period.[14] By late 2021, this model had attracted over $700 million in treasury assets, corroborated by on-chain data tracked by DeFi Llama.[14][24] The concept spread to what became known as “DeFi 2.0” protocols, each built around owning rather than renting liquidity.

Points systems for airdrop distribution. To reduce airdrop farming by accounts with no long-term commitment, projects including friend.tech and Blast introduced points systems in 2023: users earn points for sustained activity (transactions, referrals, TVL contributions), and points later convert into token allocations.[3] This shifted airdrops from one-time snapshot distributions to gamified loyalty programs.

BRC-20 tokens on Bitcoin. The BRC-20 token standard, which uses the Ordinals protocol to inscribe fungible token data onto individual satoshis on the Bitcoin blockchain, emerged in March 2023.[3][27] BRC-20 tokens are not a fundraising mechanism in themselves: a token can be deployed under the standard without any investor sale. Their significance lies in expanding public token issuance beyond Ethereum-compatible chains for the first time at scale, attracting speculative trading volume and driving substantial inscription activity through Q4 2023 and into 2024.[3]

Tokenized real-world assets (RWAs). As crypto-native yields collapsed and traditional interest rates rose, protocols started integrating real-world assets, particularly U.S. Treasury instruments. MakerDAO added $500 million in U.S. Treasury exposure in late 2022.[4] Tokenized money market fund assets under management grew from approximately $2 billion in August 2024 to more than $7 billion by August 2025, according to Chainalysis.[15]

According to CryptoRank data, AI Agents represent the largest single category of token sales by volume as of mid-2026, accounting for 23.4% of all tracked sales.[12] IDOs continue to dominate by number at 74.5% of public sales. IEO launchpads (Binance, OKX Jumpstart, and KuCoin Spotlight in particular) consistently deliver higher average ROI per sale, partly because they screen projects more selectively.[3][12]

Global Regulatory Landscape: 2019–2026

FATF: AML/CFT Standards for Virtual Assets (2021)

Before MiCA existed, the Financial Action Task Force (FATF) set the first globally applicable AML/CFT (anti-money laundering / countering the financing of terrorism) standards for virtual assets. In October 2021, FATF published updated guidance on the risk-based approach for virtual assets and virtual asset service providers (VASPs), superseding its initial 2019 guidance.[23]

The 2021 guidance covers three areas that subsequently shaped national-level crypto legislation worldwide. First, the VASP definition: any natural or legal person that exchanges, transfers, safeguards, administers, or participates in ICOs or similar offerings as a business on behalf of customers qualifies as a VASP subject to AML/CFT obligations. Second, the Travel Rule: applying FATF Recommendation 16 to VASPs, originating VASPs must obtain, hold, and transmit beneficiary information (name, account number, address) to the receiving VASP for transfers at or above $1,000 / €1,000; this formulation became the global baseline for transaction monitoring requirements in jurisdictions that subsequently passed crypto legislation. Third, risk-based approach requirements: VASPs must conduct customer due diligence and enhanced due diligence for higher-risk transactions, including those involving unhosted wallets or counterparties in jurisdictions with weak AML/CFT frameworks.[23]

FATF standards are not directly binding law, but they function as de facto requirements: jurisdictions assessed as non-compliant through FATF’s mutual evaluation process risk placement on its grey or black lists, which create material barriers to correspondent banking relationships and cross-border capital flows.[23]

European Union: MiCA

The European Union’s Markets in Crypto-Assets Regulation (Regulation EU 2023/1114, “MiCA”) is the first comprehensive regulatory framework for crypto-assets adopted by a major jurisdiction.[5] It was published in the Official Journal of the European Union on June 9, 2023, and implemented in two phases:[5][16]

• June 30, 2024: Rules governing issuers of asset-referenced tokens (ARTs) and e-money tokens (EMTs) became applicable.
• December 30, 2024: Rules governing public offerings of all other crypto-assets and the authorization of crypto-asset service providers (CASPs) became fully applicable.

MiCA categorizes tokens into three types: e-money tokens, asset-referenced tokens, and other crypto-assets. For offerings of “other crypto-assets” (the category that encompasses most token sales and traditional ICO-type offerings), the core requirements are:[5][17]

• Issuers must be legal persons; natural persons may not conduct public offerings of crypto-assets in the EU.
• A detailed white paper must be published before any public offer or admission to trading on a crypto-asset trading platform.
• Retail purchasers who buy directly from an issuer are entitled to a 14-day right of withdrawal with no penalty and no requirement to give reasons.
• Offers are exempt from the white paper requirement if made to fewer than 150 persons per EU member state acting on their own behalf, if the total consideration across the EU is below €1 million over 12 months, or if solely addressed to qualified investors.

MiCA does not require crypto-asset issuers to maintain a physical presence within the EU, intentionally, to keep the EU market competitive.[17] MiCA also establishes rules for market abuse prevention in crypto-asset markets, including prohibitions on insider trading and market manipulation comparable to those applied to traditional financial instruments.[5]

FSB: Global Regulatory Framework (2023)

In July 2023, the Financial Stability Board (FSB) published its global regulatory framework for crypto-asset activities, after the G20 mandated it following the 2022 market events.[6] The framework consists of two sets of high-level recommendations: one for crypto-asset activities and markets generally (CA Recommendations), and one for global stablecoin arrangements (GSC Recommendations).[6]

The framework’s organizing principle is functional equivalence: the same activity, the same risk, the same regulation, regardless of whether it involves traditional financial instruments or crypto-assets.[6]

The recommendations require:[6]

• Regulatory authorities must have explicit powers to supervise and oversee crypto-asset issuers and service providers. Providers must meet all requirements before beginning operations.
• Governance frameworks must include clear lines of responsibility and accountability, including for entities that describe themselves as decentralized.
• Cross-border cooperation and information sharing is required between regulators to prevent service providers from evading oversight by migrating to lightly regulated jurisdictions.
• Crypto-asset service providers must maintain risk management frameworks covering operational, liquidity, credit, and market risks.

In October 2024, the IMF and FSB published a joint G20 Crypto-Asset Policy Implementation Roadmap, assessing progress in applying these frameworks across member jurisdictions and identifying remaining gaps, particularly in the regulation of lending, borrowing, and margin trading on crypto-asset platforms.[18]

United States: SEC Enforcement

The U.S. Securities and Exchange Commission continued to apply the Howey test (established in SEC v. W.J. Howey Co., 1946) to determine whether a given token constitutes a security: an investment of money in a common enterprise with an expectation of profits primarily from the efforts of others.

Following the block.one settlement in September 2019[8] and the Telegram settlement in June 2020,[9] the SEC brought additional enforcement actions against ICO issuers. In January 2022, the SEC charged the founder of Crowd Machine with fraud related to a $40.7 million ICO.[19] The SEC’s Cyber and Emerging Technologies Unit continued to pursue unregistered offerings throughout the period.[20]

The NYU Compliance and Enforcement program found that the SEC brought enforcement actions against only a minority of ICO issuers.[21] The uncertainty of potential action, with no clear registration pathway available, remained a significant constraint on U.S.-based token launches throughout the period.[21]