Pros and Cons of ICO Certification

The father of Etherium Vitalik Buterin believes that “ICO regulation will clarify the process. Especially for those who want to arrange their own token crowdsale”.

The government world has divided into two camps: those who want to ban ICO, and those who want to take part in its regulation. It’s obvious you cannot stop the evolving trend, thus the Chinese steps may only trigger the shady schemes to evolve.

The key problem with ICO today is the abundance of scams, and absolutely no protection for investors. Co-founder of Genesis Vision Dmitry Nazarov thinks that “ICO must be regulated in some way, and not necessarily by the government, but by the industry peers, to lower the amount of fraudulent projects, protect the investors and make all the ICO process more transparent.”

Options

  1. Choose the jurisdiction where the government regulates the ICO. For example, in the USA and Singapore the token crowdsale is regulated by federal securities law, and investors are totally protected in this case. However, the ICO launch process for issuers is very complicated and takes much time and money.
  2. Get the ICO license from the Financial Commission which has just started to regulate this process. In September, the body announced it had established a committee tasked with the certification of initial coin offerings. Moreover, the first certificate was already given to Genesis Vision.

If the first option is already widely covered by many articles, the second one doesn’t look so clear. The Solution Architect of Genesis Vision Dmitry Nazarov readily shared his experience with the readers.

Hurdles

  1. There are no tested legal norms or well-defined criteria. At the same time, traditional methods of certification are not suited well for the model of a decentralized campaign.

Discussion of some questions took a very long time, as a committee that was reviewing our ICO was not always reaching a consensus on how to evaluate each question or answer, as there are still absolutely no good criteria to define a ‘right’ ICO. At the same time we were satisfied with all the process of interaction with the company, committee members were really trying to delve as deeply as possible into details of our projects.

  1. The fact of conducting an audit didn’t give us any guarantees of a Committee’s positive conclusion, and as there are no well-defined criteria, we didn’t even have a chance to estimate what aspects of our company will be evaluated and how it will be done.
  2. The Commission has checked over 150 criteria to evaluate our ICO project and our company, including legal factors, financial model, our technological considerations, but the most unexpected one was the deep scrutiny of our blockchain technology. The Financial Commission is a regulator of traditional markets and we were waiting for a more formal evaluation. However, there were many people with great knowledge on the decentralized apps in the Committee.

All in all, the certification process took 2 months.

Benefits

  1. The certification allowed us to structure our knowledge about the project. Many things, which seem obvious, take a very different shade when you’re answering the questions of auditors. It allowed us to uncover some narrow places of our project and develop a prompt solution for them.
  2. The certification attracts more potential ICO investor trust, as the projects with such certification always seem better. Investor can’t always evaluate project from all angles, as he doesn’t necessarily possess the knowledge in all the areas where ICOs operate, and an external audit gives him guarantees that all the projects processes were studied by people with an overwhelming expertise.

To Be or Not To Be

The main advice – if you are not ready to do it in a transparent, open way – then don’t get into certification. This will only result in squandered time and money.

In any event, we believe that ICO must be regulated in some way, and not necessarily by the government, but by the industry peers, to lower the amount of fraudulent projects, protect the investors and make all the ICO process more transparent.

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