Best Practices

Even though many countries are already discussing legal frameworks to regulate initial coin offerings - also known as token generating events - there is no formal and complete regulation for all kinds of tokens. The financial authorities also have different views about licensing requirements for the token generating activities, obligation to follow know your customer practices or anti-money laundering regulations, legality of these activities, among other concerns regarding ICO.

Because of that, some best practices should always be followed by organizations before considering a token generating event, such as:

  1. Publishing a Whitepaper with minimum information about the organization, the team behind the project, the technology that will be used to develop the project, a project development roadmap, the maximum of tokens available for sale, and how the funds received will be used. To guarantee that the project is trustable, the whitepaper should divide the usage of funds into steps and release only a part of the funds acquired to the team in each step, as necessary. Also, it should mention that if the value needed is not reached in the timeframe defined, the money will be properly returned to the investors.
  2. Anticipating possible risks for investors and being transparent about the progress of the project funded by tokens sale, regularly updating the investors about its advances and step backs. Having an open communication platform with the buyers and parties concerned, either in social media or on the organization's websites is a sign of commitment and concern.
  3. Using alternative pricing mechanisms instead of fixed price approach or non-fixed price approach, to avoid underpricing or overpricing of tokens respectively, and be transparent about the mechanism used. Through alternative mechanisms the purchase price will likely change as the sale progresses. One example of alternative pricing is the Dutch auction, in which the price will progressively decrease, and the participants can invest money considering the current price or below it, at the final price when the limit value is achieved.