An academic study from the University of New South Wales’ Faculty of Law, covering a sample of 150 ICOs from what it estimates to be a total number approaching 1600, has concluded that the majority of ICOs are not providing basic details in relation to their business model.
Among the basic line items that ICOs fail to include are country of domicile, the legal entities that they are tied to, a justification of costing for the money being sollicited, and guidance on legal restrictions pertaining to who can invest or otherwise in the venture.
Information is Generally Poor
The report also laments a general “paucity” in relation to data provided by ICOs. 21% of white-papers made no reference to the project team, 19% provide little to no information outside of a technical specification of the project and 71% make no reference whatsoever to legal considerations.
The authors assert that, when ICO participants lack basic information in relation to the investment context, the door is opened to ICO project teams “channeling money .. to personal use.“
Global ICO Picture Equally Unclear
In the context of what is largely a legislative vacuum, tracking the total number of ICOs and the funds that they have collected, the report notes, is proving to be particularly difficult.
The authors call into the question the often-cited figure of $3.7 billion of monies so far raised collectively by tokenised sales, a figure which they argue is massively under-stated, suggesting that the actual figure may be almost three times higher.
Only 6% of ICOs within its sample had failed to reach soft-cap – the amount of capital an ICO itself states to be the minimum funding required to proceed with its project. The report did stipulate, however, that 25% of the ICOs on its radar were still running during the study itself.
The risks associated with “the ICO bubble” are not systemic, the report concludes. Recent indications have been pointing to a sharp downtrend in the ICO arena with the total number of funds raised in November failing to match 10% of October’s figure, according to some sources.