The beginning of a healthier ICO market.
The word “regulated” sometimes causes panic within the world of crypto. It’s understandable, that crypto enthusiasts would want to protect against things turning centralized. People are afraid of losing the freedom that blockchain offers, but sometimes that can make people blind to the pros of regulation amongst ICO’s, and the fact that not everything regulated has to be centralized. Some types of regulations, could simply increase the trust element of the blockchain, and save a lot of people from financial risks that they may be unaware of when participating in an ICO.
With the ICO boom, it’s not surprising that amongst the revolutionary projects that blockchain has made possible, there are also a lot of ICO scams and hidden risks. It may be the case that to move forward and drain out the ICO’s that aren’t legitimate, some type of regulations will have to be put in place.
It’s also looking likely that regulations will be enforced soon, so in that sense, it’s probably better to be prepared and already be regulated.
“The rise of coin offerings has disrupted social and economic order and created relatively large hidden financial risks, and in some cases may amount to fraud.” “Misleading rates schemes at home and abroad may constitute fraud and amount to illegal fundraising.”
China National Internet Finance Association
Here are some pros of ICO regulations
Obligated to deliver –
If the ICO market is regulated, ICO’s would become legally obligated to deliver the promises and business plan that they have given during the ICO. This would obviously give investors a lot more assurance.
Better transparency –
There would be clear guidelines in place regarding what must be included in an ICO and business plan. This would encourage companies to be more extensive in their set-up of the ICO as well as making business plans much more transparent. We already know blockchain investment, in general, should offer a lot of transparency, but investors with less knowledge of tech can still feel bombarded with information that obscures the actual business plan. A bet on the surface could come across as promising when in reality the investment is likely to be lost.
Adding legitimacy to the market –
With so many scams and scandals hitting ICOs, legitimacy can be damaged and trust lost. An investor coming across just one fraudulent ICO can easily give them the idea that all ICOs are a risky choice with bad practices. Regulations, could make up for some of the damage done by fraudulent ICOs. It would make ICOs more likely to be viewed as a serious and mature market.
Providing better assurances and less scam –
Regulations can make things safer for both businesses and investors; it can provide a legal method of resolving disputes, as well as helping to avoid industry hazards. It would mean that investors would have legal means of holding top a business account. If an ICO got hacked, there would be much more chance of the investor affected being able to claim some money back with a scheme that is regulated. Giving these assurances, Investors could participate in ICOs with a lot more confidence.
What’s changed in the ICO market?
Newbie’s are getting educated –
Even people that have made mistakes as newbie investors, have learned from their mistakes and become experienced crypto investors. A lot of people who have in the past invested in poor tokens now have impressive portfolios and a careful attitude towards them.
There are a lot more mature crypto investors than there used to be because of this. These careful, mature investors are going to have higher expectations and want to avoid anything that doesn’t show legitimacy.
With the ICO boom, projects have a lot of competition in the industry. With the thousands of ICO’s available to choose from, projects have to get better to stand out and to keep up with competitors. It’s caused much better quality projects to be on the ICO market.
Investors and funds –
With investor’s pools and funds involved, there are more expectations when it comes to a clear legal structure, and delivering a functional product. This has given projects a push to get things in place and make it work because if they want the involvement of investor pools and funds they have to comply.
Long-term leaders are cooler than one-hit-wonders –
As the ICO market has matured, people’s expectations of ICO’s have too. People are expecting leaders in the market for months, not scammers for a matter of days. Reputable ICO founders will be able to earn even more consulting other ICOs and similar.
Ideas are interesting but functioning products are revolutionary –
It’s better to have great tech than marketing. 2018 has brought a want for working products, not just mere ideas.
Who will play a role in regulations?
Here are just a few of the authorities that will play a big role:
The Swiss Financial market Supervisory Authority (FINMA), have published ICO guidance. They are deeply involved in Fintech and support Fintech companies by providing them information on regulatory issues. They have published guidelines to create transparency in regards to the handling of ICO financial market law.
The European Securities and Markets Authority (ESMA) have quite firm views on regulation. They issued a press release in November 2017, reminding firms involved with ICO’s their obligations under EU regulation.
This is the US Securities and Exchange Commission. They enforce security laws to protect American citizens; this includes regulatory guidance for ICO’s.
FINRA has a regulatory filing and reporting section on their website, as well as a rule and guidance section. They make it really simple for companies to find out if they are compliant with the rules, and can even pre-warn companies of future compliance problems that could arise.
“TrustUnion are already in contact with the majority of the above authorities. We will ensure that TrustUnion are fully compliant, accredited and regulated in many countries.”
Time to move on from the Wild West
A big cause of the problems in the crypto world and the one that has got the attention of regulators is moral hazard.
Even though regulations are a complicated topic when it comes to crypto, they are necessary; and they are going to happen.
As soon as Crypto starts to build itself a reputation that is taken seriously, moral hazards knock it right back to the wild west, that’s associated with illegal practices and scams. To move things forward as an industry, we should want to address the pain-points being found.
As a community, we should be assisting in the process of regulations and thinking about possible approaches that can be taken to remove the insufficiencies from the industry.
It is easy to believe that regulations are government’s way of regaining control, but the reality is if we don’t take action all control could be lost, and it will take a lot of innovation away from the industry with it.
After all, we are human and it could be naive to believe that crypto investors don’t need any protection; when even the best traditional fiat investors do. Sometimes it is our own irrationality that we need to be protected from as well as others.
The difference between security tokens, utility tokens, and digital currency
In the industry of cryptocurrencies and ICOs, there’s a lot to take in. It can sometimes get confusing what everything is. Here are some definitions that show the differences between, digital currency and security and utility tokens. Understanding what type of token a project has can play an important part in knowing which ones to invest in.
A digital currency is an electronic asset. It can only exist in digital form. An example of a digital currency is Bitcoin.
They can be used to make payments, and also purchased by investors and held as assets, in the hope that the currency’s value will increase.
A security token is used to raise money and in the ICO world is usually swapped later by the corresponding utility token when the final technology show up. This practice is completely unregulated and forbidden.
Security tokens are similar to stock or company shares held by investors (IPO).
As well as for an ICO, security tokens can also be used for digitized loans. They are highly liquid due to the fact they can be traded on the platform.
In the United States, they are not allowed. ICO’s must be compliant with SEC before the ICO or token sale begins. Although the US and SEC are not against ICO’s, they are against unregulated security tokens.
To be a utility token, there has to be some type of utility within a decentralized application, that a projects’ team are raising the ICO for. They can also be called app coins or app tokens.
Utility tokens give users future access to products or services at lower prices. A project can raise funds, by holding an ICO and selling their utility tokens. Basically, the token acts as a form of credit that can be used to redeem future services.
The rise of the STO
This year, you can expect to see Security Token Offerings replacing the ICO phenomenon. STO’s have the potential of revolutionizing investment as we know it, and rejuvenating the crypto market.
This is because they will offer more than simply providing a legal route for companies looking to supply new cryptocurrencies.
Unlike utility tokens, security tokens can be linked to nearly any type of investment.
Prime STO platform Polymath, has estimated that security tokens will soon take over the utility token craze. They predict that security tokens will take a massive rise in value. In 2018 the value is expected to reach 2 Trillion USD, and it won’t stop there; by 2020 they have estimated to reach the value of 10 Trillion USD.
The ICO hype in of the past few years has definitely played a part in triggering the rise of the STO.
ICO’s gained a lot of investor attention, literally raising millions of dollars, then to disappear with the money raised, and no working product.
The rise of scammers in the industry got the attention of the U.S Securities and Exchange Commission, warning that they will be investigating and shutting down fraudulent ICO’s. Since then it has halted many ICO’s accused of being fraudulent, and seized their assets.
STO’s will help to remove bad actors from the crypto world, and provide a way for cryptocurrency tokens to become SEC-compliant.
What token does TrustUnion provide?
As previously stated, using a security token to raise the money and swap it later is not in compliance with any jurisdiction. This is why we are building our own blockchain and we cannot do it with an ERC-20.
With this prerequisite, we ensure to be considered as a utility token because we will never use a swap technique to convert your investment into the final technology.
Furthermore, this is entitled to our good practices because we don’t want over complicated procedure for the end user that raise fear against unknown technology.
Finally, our token will be a currency, and will be used to buy goods and services, pay the transactions fees and the required gas for smart contract usage.
TrustUnion’s approach to ICO regulations
At TrustUnion, we understand the need for a global coordination process for the bulk adoption of blockchain technology. It is because of this, we have signed the European Charter.
The charter provides self-regulation rules for European ICOs. The aim is to establish and build consensus, the best practices concerning the launch of ICOs and ITOs. It seeks to enable projects to federate resources within a regulatory-free environment. It addresses subjects such as:
- The need for KYC and what type
- Token type, structure, and uses
- Defining the ICOs purpose
- Plans of due diligence being made before the ICO launching
- Minimum whitepaper and prospectus structure
- What information is provided in the supporting documents of the ICO
“The objective of TrustUnion technology is to bring an ecosystem of tools enabling the integration of all kinds of services to allow supply and demand to meet in any forms”
The TrustUnion team want to make it clear that we are going further with verifiable commitments, and are pro-regulation of ICOs; because we want to be a model of trust right from the start.
As a team, we are committed to being the world leader in applying good practice, because that’s what blockchain requires to grow; good people and good practices. This is where TrustUnion has the potential to change the world.
TrustUnion will prove the commitments we have made. To do this, the tokens owned by TrustUnion founders will be sealed by smart contract, to be released over two years. Also, the money that is raised from the ICO will be safely owned by a foundation.
Distribution of funds to the team, advisors and investors will be 100% transparent, and there will be no white-list or pre-undergrounds ICO.
For live updates and close community engagement, please join TrustUnion’s social channels: