New Set of Guidelines Aimed at Self-Regulating the Token Economy

With the hope of spurring the formation of a self-regulating organization (SRO) in the blockchain/crypto industry, the Chamber of Digital Commerce has just released a comprehensive set of guidelines for the emerging token ecosystem. The trade association’s Token Alliance has drafted the first edition of a report, entitled “Understanding Digital Tokens: Market Overviews & Guidelines for Policymakers & Practitioners.” It is described as a collaborative report for utilization by innovators, investors, and policymakers. Paul Atkins, CEO of Patomak Global Partners and former SEC Commissioner, and Dr. James Newsome, Founding Partner of Delta Strategy Group, former Chairman of the CFTC and Co-Chair of the Token Alliance, co-chaired the report.

Atkins states “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.” Atkins believes that it is important to provide guidance to consumers, regulators, as well as the industry itself.

The report is featured in three parts, Regulatory Overview, Principles and Guidelines for Utility Tokens, and the Token Economic Landscape. The first section focuses on legislative overviews of current laws in the space from five countries (the United States, Canada, Australia, the United Kingdom, and Gibraltar). Next, the report lays out a set of principles to better shield token sponsors and trading platforms from unintentional regulatory risk. The final section lays out the growth and evolution of the token landscape as it currently stands, using real-life economic data and statistics.

Self-regulation

The development of an SRO is becoming a major focus for the blockchain and cryptocurrency industry. Gary DeWall, an expert in financial services regulatory matters, spoke at Coindesk’s Consensus 2018 conference about the need of self-regulation in the space due to Congress’s lack of resources to establish sound regulation. He said, “One critical role of SROs … is in elevating the reputation of regulation, as it will set a standard that will hopefully be adopted by regulators in the future.”

Many have compared the current regulatory climate in the industry to the Wild West. Granted, current financial regulations attempt to keep the space from being entirely lawless, but this framework is just not adequate to deal with the leaps and bounds being made with the technology. Certainly, we just need to look at last week’s news with the annulment of a cease and desist order from the government of South Carolina against blockchain logistics company ShipChain, to view the uncertainty our current patchwork of regulation provides to the industry.

To that end, “The Token Alliance is taking a positive and proactive approach towards working with regulators, which could ultimately create unprecedented opportunities for investment, innovation and jobs,” said Newsome. “This report will serve as an important resource for policymakers seeking to educate themselves and engage in meaningful industry dialogue.”

The Token Alliance expects the report to evolve over time as the regulatory landscape shifts. The Alliance will continue to update the document, expanding the guidelines to address more concerns as well as responding to these shifts. They invite interested parties to join in on the conversation by providing feedback on the report via GitHub.

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