The good, the bad and the ugly side of Initial Coin Offerings

Straits Times

10/04/2017

Nick Davies

Emerging Companies + Venture Capital, FinTech, Technology Transactions, Private Funds, and Blockchain + Smart Contracts

In The News

Nick Davies was quoted in The Straits Times (Singapore) article “The good, the bad and the ugly side of Initial Coin Offerings”.

“There is much scope for abuse as there is little corporate governance that holds the start-ups responsible for delivering their project, or accountable for how they manage huge budgets obtained from a successful ICO”, said Nick Davies, a lawyer with Morrison & Foerster (Singapore). Further, a digital token’s tradable value is also affected by the technical ability of the team behind the project, he added.

“Flaws in the programming can lead to a token’s tradable value plummeting within minutes. For instance, a digital token called DAO was hacked last year due to a single absent word in the application’s coding. As a result of this oversight, the digital wallets of numerous investors were illegally accessed, and more than US$50 million worth of tokens were stolen,” he added.

Mr Davies noted that an outright ban is an easy way for regulators to take control, but such actions “are not necessarily conducive to creating a new healthy cryptocurrency ecosystem”.

He added: “The technology behind ICOs is not going to be uninvented, but smart regulation could make Singapore a global hub for what the market has already priced as one of the most important technologies for the digital age - that is blockchain-based companies using distributed ledger technology on a truly global scale.”

Mr Davies said Singapore’s progressive approach makes it more attractive to founders of blockchain-based companies than Switzerland, the US, Gibraltar, and the Cayman Islands.

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