ICOs have up until now been operating in a blissfully regulation-light environment but that could all be about to change.
The Financial times has recently reported that the US’ Department of Justice is now on the hunt for its first ICO “example” and senior figures within the Blockchain universe are advising ICOs that they may want to think about putting their houses in order.
ICOs have been a victim of their own success. The vast sums being raised are drawing in less sophisticated investors. When those investors lose money, the Securities and Exchange Commission (SEC) tends to step in.
Best Practices Adoption
The Dutch Central Bank recently warned its citizens against investing in ICOs as they risked involving themselves in “manipulation, money laundering, terrorism financing and other fraudulent practices.”
It turns out this view is not confined to outsiders. Charles Hoskinson, Input Output CEO and former CEO of the Ethereum project, has warned that while some ICO projects, “may withstand scrutiny, many will not. When you see these types of structures, maybe some of them are legitimate, but 80 or 90 percent will end up just being copycat ventures.“
Bloq chairman Matthew Roszak who is also a founding member of best practice body The Token Alliance identified transparency and vested fund lockups as the two most important elements for an ICO to engage with if it wants to demonstrate credibility, effectively calling for self-regulation.
The Swiss Example
What might a self-regulating ICO space look like? Well, according to Olga Feldmeier, COO of fintech start-up Smart Valor, it looks a lot like Switzerland. Common principles not always transcribed into law such as transparency and vested capital approaches have been guiding the country’s own ICO ventures.
Financial self-governance, however, is embedded deep in the Swiss culture. Whether this model can be successfully replicated elsewhere seems optimistic but may be a necessary step in a regulatory environment which required a few decades to be erected and which currently struggles with an innovative capital-raising model that as a mass phenomenon has existed for less than a year.