Crypto Valley Association (CVA) in Switzerland, a hub for bitcoin and blockchain activity, has today announced its first code of conduct for initial coin offerings, or ICOs. The code places a legal and moral set of standards on token launches to operate responsibly.
The government-supported not-for-profit association promotes the development of blockchain and cryptocurrency businesses in the canton of Zug, often referred to as the Crypto Valley thanks to its accommodating regulatory and business environment.
The newly released code of conduct is intended to be a set of guidelines for startups that are launching their initial coin offerings to ensure that they comply with the law, meet the best security standards, and are upfront with investors about terms and how the funds will be used.
ICOs exploded in popularity in 2017. The funding method sees blockchain and crypto-related startups raise money by issuing their own crypto tokens to investors that would eventually have their own value. ICOs raised some staggering amounts of money but there were also a number of scams, which has drawn the eye of regulators.
The CVA hopes the code of conduct will bring some clarity to the chaotic industry.
“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,” said Luka Müller, chair of the Policy & Regulatory Working Group of the CVA.
The code calls on companies to be fully transparent with backers about what their ICO is hoping to achieve, what function the newly created token will serve, and what the risks are. Crucially, it calls on these companies to make the details of the token sale easily understandable for the non-tech savvy or those who are new to cryptocurrency and blockchain technology.
“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,” added Müller. ICOs are usually – but not always – accompanied by a whitepaper that explains how the product or service will work.
“The rapid development of token launches has raised concerns around stability and security, and as a leader in this field, it’s our responsibility to support the industry. The widespread adoption of this framework, combined with careful supportive regulation would bring stability to an exciting but uncertain trend in blockchain,” commented Oliver Bussmann, president of the CVA.
Further to the ICO framework, the CVA has also issued a code of conduct for its own members on how they engage with the industry. The CVA has more than 550 corporate and individual members.