Chamber of Digital Commerce Releases Guidance on ICOs to Support Self-Regulatory Approach

The core question: is a token a security? The SEC deems Bitcoin and Ether commodities. A token structured to offer investors a return or the potential for price growth, however, could be classified a security. That classification would trigger SEC oversight and mandate compliance with securities regulations.

"These industry-developed principles are an important tool for responsible growth and smart regulation that strikes the right balance between protecting investors while allowing for innovation in this new technological frontier," said Paul Atkins, CEO of Patomak Global Partners and a former SEC Commissioner.

The Token Alliance designed this report to help companies understand securities law and structure token sales to avoid regulatory problems. The report covers the U.S., Canada, the U.K., Australia, and Gibraltar. It lays out best practices for utility tokens and documents token fundraising trends from 2013 through mid-2018.

Token fundraising accelerated at a striking pace. Companies raised $100 million through token sales in 2016. In 2017 they brought in $7.3 billion. The first quarter of 2018 saw fewer new token projects—roughly 220 compared to over 300 in Q4 2017—but founders and companies raised nearly 50 percent more capital, bringing in $6.5 billion for the quarter.

The Chamber and Token Alliance present this as a foundation for the industry. The token sector will grow in complexity and scope. With these standards in place, the industry can move toward self-regulation as the market expands to reach potential valuations in the trillions of dollars.