By Josiah Wilmoth
Switzerland’s Crypto Valley Association has launched a code of conduct for initial coin offerings (ICOs) and token generation events (TGEs) intended to standardize best practices across this burgeoning industry.
Crypto Valley Association Launches ICO Code of Conduct
ICOs and TGEs raised an estimated $6 billion in 2017, up from less than $100 million* the year prior. The rapidity of this nascent funding model’s ascent has demonstrated its viability as a way to bootstrap blockchain startups, but the lack of clear best practices has allowed an unnecessary level of uncertainty to pervade the space — problems that affect token sale organizers alike.
Announced last week, Switzerland’s not-for-profit Crypto Valley Association (CVA) hopes that its new ICO Code of Conduct will increase confidence in this innovative but nascent fundraising model.
“The growth in popularity of decentralised applications and ecosystems, often launched as so-called ICOs, has caught the attention of regulators worldwide who want to be technology friendly, but also wish to understand the risks associated with the issuing, selling and transferring of tokens by clarifying their function, as well as their legal and tax status,” Luka Müller, chair of the policy and regulatory working group of the CVA, which developed the draft Code along with a panel of experts.
“In addition, because of the rise in popularity of ICOs, new categories of contributors participate who are often unaware of the true nature of their investment, and the documentation published to accompany token launches often minimizes or ignores the associated risk,” Müller continued.
The document touches a broad range of topics, ranging from the core values that token launch organizers should exhibit to instructions on how to tackle regulatory compliance.
Making Token Sales More Transparent
At the center of the framework is a commitment to transparency, a condition that has often been lacking in the cryptoasset ecosystem. ICO scam artists have often used opacity to conceal the nature of their malevolent schemes, but the lack of clear standards on disclosures has likely prevented some token buyers from identifying these red flags
However, token buyers will not be the sole beneficiaries of this new best practices framework. Though Switzerland’s canton of Zug has earned the nickname “Crypto Valley” for its embrace of blockchain technology, Swiss officials have viewed the industry with increasing scrutiny. Consequently, a standardized token launch process promises to legitimize the industry in the eyes of cautious regulators and help them more easily distinguish between credible and questionable projects.
CVA members who breach the code will face disciplinary action from the organization, and CVA president Oliver Bussmann hopes that it will prove to be a stabilizing force for the TGE space.
“The widespread adoption of this framework, combined with careful supportive regulation would bring stability to an exciting but uncertain trend in blockchain,” he concluded.
*This figure discounts the money raised by the DAO, which was refunded through a hard fork after its smart contract was hacked and the funds were liquidated by a malicious actor.
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