Michael Gale

Control Yourself: Why ICO’s Need Self-Regulation

Google bans ICO adverting. The US, SEC, and other national regulating authorities, increasingly closing the legislative fence around ICO’s. These actions should be seen as only one side of the current ICO coin. Only one side because the two initiatives are probably interrelated. One fearing the actions of the other. Whatever the headlines, these are the current facts of life and there is a danger of the ICO baby being thrown out with regulatory bathwater. However, it is the other side of the ICO coin which really needs attention. We are dealing here with yet another case of the actions of the unscrupulous, forcing somewhat bureaucratic regulations on the those who know that morals are not paintings on a wall and scruples are not the currency of Russia[1]. Self-regulation has to be part of the answer.

Morals and scruples are the values that must underpin modern business. It’s no good saying “well I can get away with it” or “it’s just the way that business is done”, particularly when it applies to capital. Well it may be for some, but it is not the way it should be, needs to be, or can be!

Is the current ICO market simply a case of ‘buyer beware’? Unfortunately, to some degree, this will always be the case. My team have conducted a credibility analysis of over thirty ICO Advisory web sites. Almost certainly, a destination for many seeking to raise capital or those wishing to invest. Spurious propositions; spelling mistakes; team profiles with very weak LinkedIn profiles or no profile at all; missing skills and services – particularly governance; the absence of a credible blockchain technology team; advisors, who if you added up all of their advisory gigs must be critically short of sleep; the flaws are obvious. Unless, of course you are an entrepreneur looking for a cheap ICO White Paper. Or an investor, late to the party, hunting for a cryptocurrency win. In both of these cases the market has responded with flawed ICO offerings, to suit. ICO factories, where a conveyor process is employed to support the businesses prime objective, of meeting this month’s numbers, in terms of White Paper fees, have become the norm in too many quarters. The resultant pervading approach to ICO corporate integrity being: “if you can get away with it, then…..”

We are now in the market ‘clear out’ phase. The ICO market of the past is dying – or crashing – whichever you prefer. But does this mean that those left standing “see this as a potential windfall as it allows them to sell themselves as would-be warehouses, or virtual incubators, for best-in-class crypto-funded companies”[2].  Is this outcome, simply the survival of the fittest or wealthiest? Such an outcome is certainly possible.

However, there are those in the capital raising industry that understand that a professional approach is required in all cases. Those wishing to raise capital must understand that they have responsibilities when it comes to other people’s money, whatever financial instrument was used to raise those funds. Investors should be prepared to realistically assess risk. When it comes to unlicensed investors they should find sources of credible propositions. But where?

The answer, in part, is in the hands of the ICO Advisory industry. The difference between an ICO and IPO, if we take these two capitals raising vehicles as either end of the same continuum, is a question of degree. Particularly as we see the rise of IPO Asset Tokens[3], as used for “Blackmoon’s” capital raising initiatives. Furthermore, we will increasingly see the employment of blockchain and associated technologies in many exciting future capital raising projects. ICO’s and IPO’s, and all capital raising finesses in-between, require, or should require, much the same groundwork. However, it is the level of professionalism that is required of ICO Advisory firms that creates the real difference. The absence of surety, for both investors and entrepreneurs, has been missing. Even the big capital raising ICO’s of the ‘wild west’ past, can be viewed as lacking the surety that investors have the right to enjoy.

The only way this can change is either as a result of legislation or by self-regulation. ICO Advisory organisations have considerable scope to develop internal processes and client facing ‘guarantees’. These differentiating strategies can lift the integrity of the ICO end of the market. In doing so entrepreneurs and investors can rely on an end to end process which actually delivers “what it says on the can”.

[1] A reference to one of my favourite movies: “Sabrina” (1995)

[2] “Here’s Why The Cryptocurrency Market Is Not Too Spooked About Google’s ICO Ad Ban’. Kenneth Rapoza. Forbes. Mar 16, 2018

[3] Will 2019 Be The Year of IPO Asset Tokens? [https://bit.ly/2Nx4O1m]

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