Five key learnings from the first ICO summit
Olga Feldmeier, CEO, Smart Valor
On Friday 15th September I was lucky enough to have staged the first truly global crypto finance event to ever take place in Switzerland. The ICO Summit
in Zurich saw 500 delegates from the worlds of cryptocurrency, technology and finance come together to discuss everything about Initial Coin Offerings from blockchain protocols to how to conduct a successful and compliant ICO, with a further 2,000 watching a livestream of the event.
While I am aware of the general skepticism surrounding ICOs at the moment, my view is that they are a positive thing. In markets outside of Silicon Valley, where access to investment funds is limited, ICOs offer a way for cryptocurrency and blockchain-enabled crowdfunding to help young startups with innovative ideas.
Of course, work needs to be done to keep dishonest individuals and organisations from profiting in this area. This is likely to be painful process, with high-profile failures. However, I believe in the power of regulation and self-policing to help the ICO concept reach its full potential. The aim of the ICO Summit, with more events planned in the near future, is to jointly work out a self-imposed code of conduct and give guidance for upcoming ICO projects in terms of best practice.
So, here are my five takeaways from the first ever ICO Summit.
1. Bitcoin will thrive even if there is a full ban in China
While the ban on Bitcoin in China is worrying, and according to some commentators it could be a permanent thing, the consensus at the ICO Summit was that there was little cause for concern. Look at Russia, for example. Just under four years ago the country’s authorities said that Bitcoin was illegal. But now, Russia is one of the largest volume traders in cryptocurrency. China, which has capital controls and built a national firewall, was bound to take a dim view of Bitcoin. So while this is no surprise, it is an opportunity for investors outside of China to take advantage.
As Charles Hodgkinson, Founder of IOHK said at the event: “The genie is out of the bottle and we are in control of our own money. In tokens we have found the stem cell of asset classes and we can do whatever we want to with it. As a consequence of this freedom we now have a lot more responsibility as individuals, but we also have a lot more financial freedom.”
2. Switzerland is the best place right now to do an ICO
Nicolai Oster, Head of ICO, Bitcoin Suisse made the case for Switzerland to be the centre of the ICO community. The regulatory environment in Switzerland is global-by-law. While to some ICOs might look like the Wild West at the moment, they’ve been happening in Switzerland since 2014 in a compliant, regulated way. The country can certainly expand from its roots in off-shore private banking into fintech and cryptocurrency. It has the potential to take the lead in the development of standards and blockchain-backed infrastructure to become the world leader in ICOs, from a regulatory and reputational point of view.
3. Within a year, tokens will be recognised as a new asset class
William Mougayar, General Partner, Virtual Capital Ventures, cited a historical example of how regulation could adapt to new asset classes. He reminded attendees of how General Georges Doriot, the founder of INSEAD and known as the father of venture capitalism, forced a rewriting of the US Securities Act of 1940 to allow for stocks to become a new asset class. Something similar is likely to happen where ICOs are concerned. There’s a danger that regulators may try to apply existing regulatory frameworks to tokens, but a more likely scenario is that they will recognise that tokens are a new asset class and that regulations need to be adjusted accordingly. The truth is that tokens have interesting and unique properties, and are not always securities. They need to be treated as their own asset class and I have a lot of hope that this will happen, and happen soon.
4. Investing in ICOs is less risky than investing in startups
Jamie Burke, Founder and CEO, Outlier Ventures, was keen to emphasise that an investor in an ICO is not simply investing in a startup. They are investing in a community-backed digital economy, which changes the dynamics. “That really changes the dynamics because if you look at typical VC investing, 90% of startups will fail and all the value will be lost and all know-how and teams dissipate, and that is a really inefficient allocation of capital and a really inefficient way to do innovation. What is most exciting about this space is that companies that were previously developing proprietary technology and probably on the trajectory of that 90% are now looking at open sourcing their intellectual property. For me that is the most exciting thing, but it also makes investing in this space I think less fragile,” Burke said.
5. VCs need to provide more value than just investment
Outlier Ventures’ Burke also recognised that the role of VCs would change with the growth of ICOs. Companies looking to execute an ICO don’t go to VCs for investment, as they could raise more money in just a few minutes than VCs have in their funds. What they are looking for is guidance of how to navigate the ICO process, something that many VCs don’t have. So VCs need to work out how they can offer this additional value in this space, perhaps through technology partnerships. VCs will continue to provide signals to the market as to which the best investment prospects are, so they need to be very certain about what they are investing in — they will only give their backing to entities that they are heavily involved in.
Overall, I see a bright future for ICOs — though many challenges lie ahead. Many of these challenges will revolve around regulation but can be overcome if we take a responsible and sensible approach. There will be unscrupulous characters who try to use ICOs for personal profit at the expense of others, of course. But if those of us who believe in the benefits of tokenisation and the potential of ICOs to change the world — and there are many of us — can be the ones to cement the industry best practices, we can make it work.
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The second edition of ICO Summit is coming up early 2018. To receive update please subscribe at: ICO SUMMIT
