The Chamber of Digital Commerce’s Token Alliance, which brings together more than 350 individuals from five countries, 130 companies and 20 law firms, has released its latest report, “Understanding Digital Tokens: Market Overviews & Guidelines for Policymakers & Practitioners.“
As Chief Research Advisor to the Token Alliance, Smith + Crown is proud to have contributed extensive data and analysis to this report which conveys the growth and evolution of the global token landscape. In combination with the ideas and principles developed by the range of industry experts comprising the larger Token Alliance group, this report lays an important foundation for how “utility” or “non-security” tokens should be governed moving forward.
We believe the collaboration of a diverse group of leaders from industries at the frontier of this space–in economics, law, regulation, finance and entrepreneurship–is crucial to developing healthy and thoughtful standards that will underpin digital tokens moving forward.
The report features three sections, each addressing core aspects of the industry as it developed through early 2018.
Regulatory Overview: A comprehensive understanding of the regulatory environment and securities law as it relates to tokens in the United States, Canada, Australia, the United Kingdom, and Gibraltar including:
- Current legal classifications for digital tokens.
- Historical overview of regulatory actions taken by US agencies against projects deemed to be unregistered securities or bad actors.
- Overview of registration and exemption options with the SEC and other US agencies for the sale of securities.
- Secondary market trading of securities, state money transmission laws, and tax treatment of digital assets in the US.
- Anti-fraud, anti-manipulation, anti-money laundering and related regulation surrounding securities.
Principles and Guidelines for Utility Tokens: Industry-developed principles for token sponsors and trading platforms to promote sound business practices and minimize unintentional regulatory risk.
- Minimum information for token sponsors to include in white papers and other educational materials.
- Conditions under which a digital asset might be considered an investment contract or a CFTC regulated instrument.
- Suggested steps from inception to completion of a digital token distribution.
- Suggested token vetting and ongoing compliance considerations for token trading platforms.
Token Economic Landscape: An in-depth look into the growth and evolution of the global token landscape, with economic data and statistics.
- Token sale industry growth highlighting the rapid increases of late 2017 when sales numbers and funds raised repeatedly doubled on a quarter-over-quarter basis.
- Less frequently discussed trends within the token sale space, from industries hosting the most sales and attracting the largest amounts of funds, to rarely considered patterns within sale sizes.
- Geographic distribution of token sales, both in terms of jurisdictions hosting sales as well as the principal locales where projects and teams are working.
This latter portion was contributed by Smith + Crown and includes an array of charts characterizing the growth and evolution of funding for token projects.
The report will prove valuable to a wide array of stakeholders interested in the emerging landscape of token-based projects. Regulators will find this an, informative introduction to token-based fundraising from industry experts. Entrepreneurs will find this a practical guide to the complex important legal issues at play. Researchers and thought leaders will find a pithy synthesis of perspectives token projects. Ultimately, everyone interested in the promise of crypto-economic systems and cryptographically secured tokens will find a lens through which to view one of the most disruptive and misunderstood recent developments from the blockchain industry.
Figures 1 and 2 offer a high level view of the growth experienced in 2017-18, and a broader view of the landscape from 2013-18.
Impressive 2017 growth aside, token project fundraising and blockchain investments remain small relative to IPOs or venture capital investments (which are not mutually exclusive categories), as Figure 6 illustrates. Note: data accurate as of early 2018.
As illustrated by Figure 7, larger token project fundraising events have enabled increased market access to innovative projects and services directly via these events, relative to traditional, capital markets-oriented fundraising methods that are also focused on blockchain-based projects.
Additionally, the report visualizes token project fundraising distribution, geographic location of token projects, token project fundraising domiciles, and token project fundraising by industry.