A research has been published recently in which it is explained that the organizers of initial coin offerings (ICOs) usually have to pay a large sum of money to certain cryptocurrency exchanges in order for their tokens to be listed on these platforms.
The report published by Business Insider recopilates the provided data. One of the people who provided this data is Michael Jackson, a partner in the venture capital company from Europe called Mangrove Capital Partners. The other one is Oliver Bussmann, a financial adviser. Even though the names of the cryptocurrency exchanges involved in this practice of charging for listing tokens, the report reveals that some exchange platforms are charging between 50 thousand to one million dollars (depending on the importance of the cryptocurrency exchange in question) for taking tokens into account.
According to the report, the main reason for this practice could be the big growth of the initial coin offerings in 2017. The organizers of the ICOs raised large amounts of money and some cryptocurrency exchanges saw their opportunity to make money out of it as well, by charging percentages of the funds raised during an ICO.
For Michael Jackson, these listing rates are a sign of pure capitalism: “What we see on the crypto side is people who have raised $100 million and the exchanges are saying, ‘why the hell would I not get $1 million of that?’ It’s pure capitalism, is probably the best way of expressing it.”
Even though these rates seem exaggerated to Bussmann, the research points out that these rates are not that exaggerated for the ICOs, because their tokens listed on the major cryptocurrency exchanges could generate greater liquidity and consequently increase the price of the tokens, as well as the earnings of their developers. According to the report, the exchange platforms have the real power in the cryptocurrency world.
Business Insider contacted the ten most important cryptocurrency exchanges according to CoinMarketCap, but only some of them decided to comment on this topic. A spokesman of Huobi, one of the largest Chinese cryptocurrency exchanges, said the platform allows its users to vote which tokens they want to see listed without any cost for the tokens. Bitfinex assured it supported those tokens that come from quality project and that is why they would continue investing resources to make this possible.
Coinbase said that none of its platforms accepted tokens at the moment, possibly because the US Securities and Exchange Commission (SEC) has little confidence in the ICOs because of the risks associated with them, as stated in December last year by Jay Clayton, the president of the SEC.