There are two common ways in which new crypto companies raise funds, and these are an ICO (initial coin offering) and an IEO (initial exchange offering). Both involve the sale of a new token to investors, but the processes behind them are very different.
ICOs became popular around 2017, allowing crypto startups to raise money directly from people across the world. All such a team needed was a site, a whitepaper (a document explaining the project), and a token to sell. There were no middlemen or rules. ICOs were fast and easy, but risky.
With an IEO, capital raising is done by a cryptocurrency exchange, which analyzes the newcoming project in advance and handles the token sale. This adds a factor of trust and security for investors.
We’ll break down how ICOs and IEOs work, the difference between ICO and IEO, and what each of these approaches means for project teams and investors alike.
The rise of the ICO: The Wild West Era
ICOs allowed blockchain projects to raise millions of dollars from individuals around the world, sometimes with only an idea and a promise. It was essentially crowdfunding — but with crypto instead of cash.
Anyone was then able to mint a token, create a whitepaper, and start selling their coin — banks and government regulators were not needed. That openness enabled many new projects to get up and running quickly. But it also created huge problems.
Since there were no rules, scamming and overhyped projects were widespread. Some groups disappeared with investors’ money, and many tokens proved worthless. Lack of control bestowed this period with the title “The Wild West” of crypto.
Sooner or later, governments and regulators stepped in. The U.S. Securities and Exchange Commission (SEC) and others started closing down illegal ICOs.
| ICO Compliance Requirements in the U.S. (as of 2025) | |
| Category | Requirement |
| Howey Test | Mandatory (used to determine if a token is a security; based on investment of money in a common enterprise with an expectation of profits from the efforts of others) |
| Registration | Required if the token is classified as a security |
| Exemptions (Regulation D, Regulation A) | Allowed if qualifying under Regulation D (for accredited investors) or Regulation A+ (mini-IPO up to $75M) |
| Disclosure | Full and transparent disclosure required (e.g. whitepaper, use of funds, risks) |
| Marketing/Promotion | Must be truthful, no guaranteed profits, include risk warnings |
| SEC Oversight | Active enforcement and investigations are ongoing |
The emergence of the IEO: A new order
By late 2018, the uncontrolled growth of ICOs had slowed powerfully. At this time, the crypto market was filled with illegal projects, scams, and regulatory uncertainty. So, the crypto universe began to seek a more credible and structured model of fundraising. This shift gave rise to the IEO, a new, more secure fundraising mechanism. So, what is an IEO?
Definition of IEO
An initial exchange offering, or IEO, is a type of fundraising whereby a cryptocurrency exchange hosts and organizes the sale of project tokens. With an ICO, the project team sells tokens itself. In an IEO, the sale is managed by a crypto exchange, which makes the selling process more secure and structured.
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How IEOs work
To better understand the difference between ICO and IEO, let’s consider how IEOs work. Launching an IEO involves several important stages.
First, the project must prepare all necessary materials like a whitepaper and a solid team (IEO exchanges check the team for transparency, biographies, past projects and reputation). Then, you should select a cryptocurrency exchange to host the sale (Binance, KuCoin, and others). It is important to consider reputation, fees and audience.
The exchange you selected performs a thorough review to ensure the project is legitimate and complies with regulations. After agreeing on key details like token price and sale dates, all investors wishing to participate in the token sale on the exchange complete legal checks, including KYC (know your customer) and AML (anti-money laundering) procedures for investors.
Marketing is usually a collaborative effort between the project team and the exchange. Once the sale begins, investors buy tokens directly through the exchange platform, which manages all transactions efficiently and securely. After the sale concludes, tokens are automatically distributed to investors’ exchange crypto wallets, and the token is typically listed on the exchange for trading, providing investors with immediate liquidity.
- Step 1: Prepare your project (whitepaper, tokenomics, team, website)
- Step 2: Choose a crypto exchange to host the IEO
- Step 3: Apply and go through the exchange’s vetting process
- Step 4: Agree on terms: token amount, price, sale date
- Step 5: Complete legal & compliance steps (KYC/AML)
- Step 6: Launch marketing — often with exchange support
- Step 7: Run the token sale on the exchange
- Step 8: Distribute tokens to investors via the platform
- Step 9: Get the token listed on the exchange
Pros and cons of IEOs
What are the main advantages and disadvantages of a project preparing for its first IEO launch?
Main benefits of IEO
- Access to a large community of investors. If you launch an IEO on a reputable exchange like Binance, your crypto project gets immediate visibility among a global investor audience.
- Boosted credibility. Since crypto exchanges thoroughly vet projects before approval, this adds trustworthiness and legitimacy to your offering.
- Easier fundraising. The exchange takes care of the technical side — like investor verification (KYC/AML) and payment processing — so your team can focus on development.
- Quick token listing. Tokens sold through an IEO usually get listed on the exchange right after the sale, giving investors immediate access to trading and liquidity.
- Marketing support. Crypto exchanges often help promote your project, expanding your visibility to a larger audience.
- Issues you may face when starting an IEO
- High costs and tough competition. Getting approved for an IEO can be expensive, and the selection process is competitive due to strict exchange requirements.
- Less control. Because the exchange runs the sale and handles compliance, your project has less say in some aspects of fundraising.
- Reliance on the exchange’s reputation. Your success is somewhat tied to how trusted and popular the exchange is.
- Regulatory hurdles remain. Even with exchange vetting, your project still needs to navigate complex legal and regulatory requirements. These may include oversight from regulatory bodies such as the SEC, FinCEN (Financial Crimes Enforcement Network), CFTC (Commodity Futures Trading Commission), OFAC (Office of Foreign Assets Control), and others.
- Limited flexibility. Exchanges usually set the sale’s format and schedule, which can limit your ability to customize the fundraising process.
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Head-to-head comparison: ICO vs IEO
Initial coin offerings and initial exchange offerings represent two completely different approaches for blockchain projects to raise capital by issuing tokens. Below is a detailed comparison highlighting the key difference ICO and IEO have in each aspect:
| Aspect | ICO | IEO |
| Fundraising platform | Conducted independently by the project team (typically on their own website) | The fundraising is conducted and managed through a cryptocurrency exchange platform |
| Level of trust | Generally lower, because investors rely solely on the project’s disclosures | Higher, due to the exchange’s established reputation |
| Token sale handling | The project team is responsible for managing the sale and token distribution | The crypto exchange manages the token sale and also handles distribution |
| Promotion | Marketing efforts are the responsibility of the project team | Exchanges usually assist with marketing and help increase visibility |
| Investor safeguards | Minimal protections, making it a higher-risk investment | Enhanced safeguards thanks to the exchange’s KYC and compliance checks |
| Regulatory oversight | Often inconsistent, with less regulatory scrutiny | Exchanges typically enforce stricter compliance standards |
| Token listing | Projects must independently negotiate token listings on exchanges | Tokens are generally listed promptly on the hosting exchange |
| Associated costs | Typically lower, since no exchange fees are involved | Costs are higher due to fees charged by the exchange |
| Launch timeline | Can be quicker to launch | May require additional time due to exchange approval processes |
Who benefits more from ICO and IEO?
As blockchain fundraising continues to develop, both ICOs and IEOs provide unique benefits. But the main question: who benefits more from each model? Whether launching a project or looking to invest, both parties should know the pros and cons to make the right choice
For projects: ICO vs. IEO
IEOs generally bring greater value to crypto startups in terms of exposure, trust, and compliance. By partnering with an exchange, projects receive access to a large number of investors, professional marketing support, and can benefit from the credibility of the exchange. The crypto exchange generally handles KYC/AML processes and token distribution, and this reduces the operational burden on the project team.
On the other hand, ICOs give projects full control over the fundraising process. This means you establish token pricing to target investors. It is a good option for early-stage teams, but ICOs come with the added burden of managing security, compliance, and investor trust themselves.
For investors: ICO or IEO
From the viewpoint of an investor, IEOs are usually a more secure and convenient experience. Why? The exchange checks the projects before listing them, handles compliance processes, and normally lists the token soon after the offering, allowing for early liquidity.
Comparing IEO vs ICO, initial coin offerings leave more of the research and risk analysis to the investor. There is the possibility of getting in early and higher returns, but this option comes with higher risks of fraud, mismanagement, or token illiquidity.
- IEOs: Offer more transparency, security, and faster token availability.
ICOs: Involve more due diligence and higher risk, but occasionally higher rewards.
The rise of STOs and IDOs: Beyond ICO and IEO
Today, ICOs and IEOs are among the most popular approaches for fundraising in the crypto market. But newer models, such as security token offerings (STOs) and initial DEX offerings (IDOs), are two approaches that offer other opportunities for investors and for projects to increase capital.
STOs: Regulation-first fundraising
Unlike ICOs, STOs offer tokens that are openly traded securities. This means that tokens are often backed by underlying assets like equity, debt, or real estate. These tokens are sold within defined legal frameworks (for example, the U.S. SEC’s Reg D or Reg A+ exemptions).
STOs will only grow in popularity among institutional investors and startups that want to raise capital legally and transparently. For investors, STOs offer real financial benefits, such as dividends, profit-sharing, and also voting rights.
IDOs: Decentralized and community-driven
IDOs take place on decentralized exchanges in contrast to IEOs that are usually conducted on centralized exchanges. This approach allows projects to sell tokens directly to the public without relying on a centralized exchange.
Investors can participate in IDOs applying their own crypto wallets. This means that they do not transfer their funds to the exchange, but interact directly with the project’s contracts through DEX. The tokens are sold through automated liquidity pools like those on Uniswap, PancakeSwap, or other DeFi platforms.
In 2025, IDOs are gaining popularity. Why? They are accessible, have low barriers for investors to enter, and are community-driven. However, they can’t offer the same regulatory protection or due diligence that IEOs or STOs can.
Do you want to discover more IDO projects? You can follow platforms like DefiLlama, Dune Analytics or DEXstats, where data on new projects and volumes is published.
Each model, including ICO, IEO, STO, and IDO, offers a different set of trade-offs between compliance, decentralization, accessibility, and investor protection.
Develop crypto projects with Peiko and start raising money
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Orion Protocol is a great example of our blockchain development capabilities. It is a decentralized platform that aggregates liquidity from top CEXs and DEXs (including Binance, KuCoin, Uniswap, and more). It offers traders the best prices from exchanges, and all within one secure, non-custodial interface.
The client chose us to develop the platform from scratch. The main task was to turn the client’s idea of a simple exchange into a full-fledged DeFi ecosystem with its own token, ORN.
What we delivered:
- Non-custodial liquidity aggregator, ensuring users get the most efficient trades;
- Integrated leading wallets (MetaMask, TrustWallet, WalletConnect);
- Developed Orion Terminal for one-click trading;
- Pro trading tools (order book, TradingView, AMM support);
- Cross-chain trading capabilities (Ethereum, BNB, Polygon, Arbitrum);
- A native ecosystem token — ORN (to power the ecosystem, power staking, and support fee discounts).
Now, Orion Protocol is a leading DeFi platform with a reputation for secure, efficient, and optimized trading on multiple blockchains.
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Conclusion
Comparing ICO vs IEO, both these approaches are used to raise funds for blockchain projects, but they differ significantly in their implementation and level of investor trust.
ICOs are launched directly by project teams and provide full control over the fundraising process. However, this also means that you have to handle everything yourself – marketing, security, and compliance.
IEOs, on the other hand, are conducted on official cryptocurrency exchanges that not only sell but also verify projects and provide access to a local investor base. IEOs are usually safer and more reliable for investors, but require higher costs from the project team.
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