Over the past few months, there has been a wave of initial coin offerings (ICO) coming onto the market, alongside the meteoric rise of the price of digital currency Bitcoin.
While Bitcoin prices have fallen significantly since reaching their all-time high of nearly US$20,000 per coin, cryptocurrency stocks have been more resilient and have managed to hold onto most of their gains.
One of the newest cryptocurrency companies is Innopolis, Russia-based Izetex Pte Ltd with its IZX open blockchain monetisation platform for independent game developers with elements of augmented (AR) and virtual reality (VR).
Izetex recently launched its ICO in Singapore, with one IZX equivalent to US$1. It is targeting to raise up to US$50 mil with 50 million IZX tokens with the value based on Ethereum, another popular digital currency.
Blockchain and cryptocurrency are often used in relation with one another, but the former is the technology that enables the existence of the latter. Blockchain is a public financial ledger maintained by a network of computers that can track the movement of any asset without the need for a central regulator.
Established in 2016, Izetex was originally an IT-based company with a focus on developing online games and created the underlying IT platform to develop such games.
Its first game, also named IZX, used AR and VR to compel players to hunt for its tokens scattered across the city by restaurants or stores that want to attract new customers or as part of their loyalty programmes.
Players who installed the app automatically become the owners of their own crypto-wallet and hunt the tokens to get a discount at a retail outlet, or a prize that can be exchanged at market rate for another cryptocurrency.
Since then, IZX has garnered close to 16,000 subscribers around the world, with a large base of players in Russia and East Asia.
As a pilot project, it also signed with restaurants in Saint Petersburg, Moscow and Kazan for the IZX tokens to be used as payment instruments and discount coupons.
“We aspire to see that in the near future, IZX tokens will be used in many retail outlets and other transactions in Russia, apart from the computer gaming industry,” says Izetex founder and president Alexey Zagainov.
Zagainov says Izetex aims for IZX tokens to be used in retail purchases and other transactions
Russia itself has more than 140 million population, which means that there is wide potential for the application of IZX tokens should the trend catch on.
The next stage of the platform development is the integration of apps from third-party developers, which means the developers will be able to monetise their ideas, as well as provide a next-level digital marketing platform for advertisers.
Izetex aims to use the funds raised for marketing and development of other inventions and innovations, in order to promote widespread global use of the tokens.
New fundraising avenue
Through cooperation with Amanah Capital Group Ltd (ACGL) and Kodewave Sdn Bhd, Zagainov says Izetex is not only promoting the ICO in Southeast Asia, but also exploring the possibilities of rendering IZX tokens useable in retail outlets and restaurants, especially in highly populated countries such as Indonesia and Thailand.
In Thailand, Ethereum-based payment gateway infrastructure provider Omise has entered into a strategic partnership with McDonald’s to implement its payment gateway in the latter’s online delivery website and mobile app.
This, says ACGL CEO Abas A Jalil, is what Izetex is aiming for.
In addition, ICOs announced all over the world show that they enable companies to raise funds on a global stage, instead of being bound by geography.
Abas says ICOs enable companies to raise funds on a global stage
Says Abas: “ICOs provide a valuable platform for companies to quickly raise funds. For example, for small businesses that want to raise RM3 mil, they can easily do so with ICO, change that into cash to expand their business and operations.”
At the same time, it enables existing cryptocurrency holders and new investors alike to come onboard for an alternative investment. “It provides an opportunity for newcomers who are interested in these types of companies to come in by a digital currency exchange,” says Abas.
“Overall, the ICO market is still new but has been proven to be successful in fundraising and that’s why we’re getting involved in it. ACGL’s main business is financial advisory, so we could see how our business clients in Malaysia can use this platform to invest,” he says.
Norazmi says IT companies need to catch up on developments in the world of cryptocurrencies
Kodewave COO Norazmi Othman adds: “Investors’ horizons can be expanded beyond Malaysia … they can invest in a company via smartphone and computer from anywhere in the world. The Malaysian IT industry needs to catch up.”
An ICO is similar to an initial public offering in some ways, as ICO companies create “shares” in terms of tokens to raise funds for business expansion. During the pre-sales period, ICO companies offer bonus tokens ranging from 5% to 40% to investors that buy in.
The most notable difference, however, is that ICOs are not regulated in many countries at the moment. Malaysia is one such country where cryptocurrency is traded on a willing buyer, willing seller basis.
A second key difference is the global nature of ICOs as a wider fundraising platform, which can draw investors from anywhere in the world.
Third is in terms of accountability, as ICOs are governed by a White Paper instead of a prospectus, which ICO companies typically publish online and detail their idea, business plan, roadmap and other information.
Lastly, even if the ICO does not reach its targeted aim, the remaining tokens will be burnt.
The IZX ICO is a sort of pilot project for software development company Kodewave, which is cooperating with Izetex to understand more about ICOs and their potential for Malaysian companies.
“For Kodewave, cooperation with Izetex is an opportunity for a Malaysian IT company to understand more about ICO and its potential to be used as a viable platform for various businesses to raise funds to expand their operations,” says Norazmi.
There is already interest from Malaysian technology providers to develop systems for ICOs, while companies are largely unaware of the new fundraising platform, which is why Abas says Malaysian companies should look into it.
That said, he stresses companies looking to undertake an ICO must have a strong platform with a good IT team as there is a risk of cybercrime in the form of hacking. Cybercriminals are able to steal tokens or create fake ones for distribution.
Kodewave is looking at the development of the system for the time when Malaysian companies need a local partner to undertake their ICOs.
Abas concludes: “We’re still gauging the demand and preparing for when companies start looking at the potential of ICOs.
“Based on our experience working with Russia and ICOs, we will be best positioned to help them, rather than them having to engage a team that’s far away to help on their ICO journey.”
Lending a helping hand
Amanah Capital Group Ltd (ACGL) was registered in February 2011 with the Labuan Financial Services Authority under the Labuan Companies Act 1990.
Its main activities are in cross-border business consulting, project advisory and family office management. The company also links businesses, investment opportunities and partnerships between Asia Pacific and Russia, Central Asia, Europe and the Middle East.
ACGL opened its Russian branch in Kazan Smart City in 2012 and was its lead consultant and project adviser. It is one of the few Malaysian companies actively involved in the Russian market.
Prior to ACGL, CEO Abas A Jalil served as AmanahRaya Capital Group international business head for more than seven years, which is how he became involved in several joint projects in Russia.
Leveraging contacts, he built the company into one of the preferred companies linking Russia to Southeast Asia, undertaking many projects, including the Izetex ICO.