In 2017/18, the total market capitalization of cryptocurrency markets reached all-time highs. At the same time, certain projects like BitConnect made their name as one of the most prominent ICO scams.
Therefore, a stain remains on the digital asset industry from the accumulation of failed projects and subpar investment returns since the peak of the Bitcoin bubble just over two years ago. While we take issue with those specific findings, as “pracademics” operating at the intersection of practice and academia, we hope to contribute to a solution of this systemic problem in the emerging digital asset industry.
To further investigate the need for a better disclosure framework, we conducted a poll amongst 76 industry experts.
We were astounded to find that 83% of participants stated that they do not believe utility token issuers disclose enough information to their stakeholders.
We propose simple, actionable advice based on our experiences and observations to create a useful tool for cryptographic entrepreneurs currently engaged in bringing their decentralized projects to life. The result is a short essay posting seven easy-to-follow recommendations for disclosure. They increase financial and non-financial transparency for utility token issuers, buyers, intermediaries, and regulators. On the financial side, we outline precisely the minimum details to be revealed about token issuer information, initial and current cash positions, and token treasury information. Non-financial information includes contact information, project progress updates, and open-source software elements. In our essay, we provide four case studies that support our belief in the utility of these recommendations.
Information asymmetries in financial markets are not a new phenomenon. Our central thesis is:
If cryptocurrency and utility token issuers want to list their tokens on public markets, they should provide basic levels of transparency.
Such disclosures increase stakeholder confidence, enable more sound decision making and, most importantly, attracts new market participants.
Increasing transparency is a long-term positive for projects and, more importantly, it is essential to the long-term growth of the entire digital asset industry. These minimum disclosure recommendations may increase stakeholder confidence, enable more sound decision making, and attract new market participants.
A basic but informative view of the funding and information flows present in the issuer-buyer relationship underpins our recommendations.
The recommendations aim to provide a guide for the ecosystem and community-driven operating models to co-exist with current for-profit corporate models. We encourage readers to engage with the precise wording and associated tables present in our essay. Here we provide a summary list.
With recommendations 1-4, we aim to improve financial transparency.
1. Token Issuer Information
Disclosing issuer entity details helps token buyers discern underlying…