The CFTC publishes a manual for ICO participants

A recent document from the U.S. Commodity Futures Trading Commission (CFTC) contains recommendations for those who are going to invest in an ICO and purchase tokens of a new blockchain start-up. The general...

A recent document from the U.S. Commodity Futures Trading Commission (CFTC) contains recommendations for those who are going to invest in an ICO and purchase tokens of a new blockchain start-up.

The general message of the document is not new: before investing your money in any project, you need to carefully study the technical documentation and legal description that should be in the company's white paper. It is also important to understand what kind of people stand behind the project: what are their qualifications, what projects have they participatedin, and so on. The CFTC advises consumers to pay attention if the organizers themselves participate in the ICO.

The absence of a white paper or unrealistic descriptions of team members are the first signs of a scam. For example, the organizers of the fraudulent ICO Miroskii used a photo of Ryan Gosling, saying that he was the lead developer. Despite the fact that it was obviously false, scammers managed to collect $830,000 on the sale of fake tokens and disappear.

But even an ICO organized by an honest team can fail. So the CFTC warns that there is no investment with an absolute guarantee. In addition to studying the technical and legal framework, it is necessary to consider factors that could affect the rate of tokens in the future. Among the commission's recommendations is to understand the features of the company's proposed assets. The company could issue a crypto-currency token, based on a certain standard (for example, ERC20) or derivatives, commodities and securities.

Depending on the country in which the company is registered, the legislation governing the distribution of tokens may also differ. For example, the Swiss financial regulator FINMA has issued its own guide to ICO's which specified the classification of tokens into payment, utility, and asset tokens.

In the document the CFTC says that more than half blockchain projects fail in the first few months after the ICO. And only a few start-ups bring thousands of dollars in profits to their investors. So the success of an investor depends largely on his own sense and experience.