Study Reveals ICOs Are Incompatible With Regulation
Researchers from the University of British Columbia (UBC) studied the ICO market and came to the conclusion that token sales have issues with regulatory compliance.
The study was sponsored by the government of Canada. For six months, experts were analyzing ICOs, conducted mainly in North America and some other jurisdictions. According to the UBC report, token sales initiators face the norm “compliance trilemma” and can at the same time fulfill only two of the three objectives. Among them are compliance with regulatory demands, widening the investor pool, and cost-effectiveness.
For instance, when ICO forms a distributed pool of investors, this contributes to the project’s budget. And if a startup decides to save the received funds, it doesn’t spend money to become regulatory compliant. Thus, ICO issuers must abandon one of the goals, or put all three at risk, the researchers concluded.
Depending on the priorities of the startup, scientists defined four approaches to conducting of ICO. The first, Maverick ICO, focuses on increasing the investor pool and profit, but ignores regulators who may later put pressure. The second, Private ICO, appeals to reliable institutional investors, it does not affect the budget, but refuses wide distribution. During the third, Hybrid ICO, the issuers try to complete three goals at once, but they face difficulties associated with each of them. The fourth approach suggests conducting no token sale at all.
After interviewing 45 representatives of the ICO sphere, researchers found out that they mostly see a way out of the trilemma in softer regulatory policies and more flexible norms, and call for development of a new legislative framework towards ICO.
As previously reported, France is lagging behind in the ICO market.