Christine Duhaime is a financial crime attorney and the founder of the Digital Finance Institute, where she advises digital currency companies, and the co-founder of Chatbo, an AML chatbot solution for screening and onboarding.

The following article is an exclusive contribution to CoinDesk’s 2017 in Review.

All technological advances have a good and a bad side.

Initial coin offerings (ICOs) are no different except that unlike other new technologies, their good and the bads side exist in extremes without any middle ground or balance.

The beauty

Let’s talk about the good, or the beauty, of ICOs first.

The beauty of ICOs is that they have reinvigorated the American dream of having the opportunity to launch a company, work hard and strike gold. Only this dream is real and better because it is egalitarian – an entrepreneur can be rich or poor, a banker or a farmer, a man or a woman, and with nothing more than a computer, a good business idea and funds from an ICO, that entrepreneur has an opportunity to secure investment.

There are no financial, capital raising or gender-based barriers to entry such as exist for startups raising capital in the traditional way. ICOs open the door to everyone to raise money, and in 2017, they raised over $2.3 billion.

There are other important benefits of ICOs to the economy – they allow startups to receive investments in digital currencies from other countries or from across one country instantaneously so that the ICO team can start developing technology immediately.

It means that innovation can move forward much quicker. ICOs also play an important role in helping to mitigate the growing problem of wealth disparity, distributing wealth into the hands of more, rather than fewer, people.

The beast

But there is a beast lurking in the ICO space, and that beast is an utter and complete disregard for the rule of law that has plagued the funding model in 2017.

Most ICOs violate so many laws, it’s hard to track them in the so-called white papers issued by teams. Among the most egregious are violations of constitutional law that purport to strip investors of the right to sue in the event of a dispute and violations of international treaties and human rights conventions that likewise exist to guarantee access to justice over business, investor, commercial and property disputes.

Most ICOs have next to no compliance with consumer protection laws either. Investors are rarely informed of the risks of an ICO, the risks of the technology, the risks of the complete reliance on a digital currency exchange, the risks of hacking and theft, the risks of inexperienced team members starting a startup or the risks of regulation or changes of government policies.

Consumer protection violations trigger anti-trust concerns of deceptive advertising, another area where some ICOs fail to comport with the law.

Most ICOs are incorrectly launched as foundations but solicit investments as for-profit businesses. In law, they can’t be both a foundation and a for-profit business. Many ICOs, despite what they are cleverly termed in white papers, are the issuance of securities and are launched in violation of securities law.

Finally, next to no attention is paid by ICOs to anti-money laundering, counter-terrorist financing and sanctions law when they accept investments or contributions, putting the international financial system at risk. ICO teams sometimes undertake attempts at financial crime compliance but only after funds have been accepted which is too late.

ICOs are invested in by the transfer of digital currencies from one wallet to another from anywhere in the world and such investments can be entirely anonymous such that a terrorist organization could fund an ICO without anyone being the wiser.

If that happens, despite all the benefits of ICOs, governments will severely restrict entry to the space and the party will be over.

New laws with new technology

In fairness to ICOs, though, the problem is not simply one of non-compliance with laws – there is the added problem of outmoded laws that haven’t kept pace with technology.

Although bitcoin and digital currency transactions have been around since 2009, not one government in the world has taken a leadership role in investing in learning the technology and working with the private sector to draft laws to support responsible innovation that includes consumer protection, international trade, securities, corporate, online dispute resolution and financial crime law.

Several countries have recently begun marketing themselves aggressively as ICO-friendly, but they tend to be jurisdictions known as tax havens or havens for online gambling companies that fled from the US, and their ICO-friendliness does not translate into the adoption of responsible innovation to address financial crime concerns.

ICOs need a competent legal framework and until governments allocate resources to modernize outmoded laws, ICO teams will follow the path of least resistance and raise funds in the most friction-free manner possible.

But you know what? We’ve been here before.

Decades ago, President John F. Kennedy addressed the issue of what he called the “march of technology” confronting “outmoded laws.” In a speech to Congress in 1962, he called upon the government to take action to meet its responsibility to consumers when there are technological advances by ensuring consumers could exercise their rights.

He could have been talking about ICOs because those rights, he said, include the right to be informed and protected against fraudulent, deceitful or grossly misleading information and to be given the facts to make an informed choice, and the right to be heard by being assured that government policy will include consumer interests and importantly, the right to be fairly and expeditiously treated in the court system in the event of disputes and to seek remedies.

It is necessary, he concluded, to strengthen government programs, improve government organizations and pass new laws to protect consumers when there is new technology.

While President Kennedy legislated for responsible innovation to protect consumers, his vision hasn’t been continued in the ICO space.

ICOs will be scrutinized

In 2018, the ICO ecosystem will face significant upheaval and more scrutiny.

We will see the SEC be more aggressive against ICOs that issue illegal securities or that solicit funds from U.S. persons. We will likely also see movement criminally against ICO teams or exchanges that list them, for anti-money laundering, sanctions and counter-terrorist financing failures.

We will also see many more civil actions against ICO teams for technology or investments that never materialize.

Under pressure from the U.S., tax and other safe haven countries that solicit ICO businesses will likely be forced to take a responsible approach to innovation to protect the financial system.

Believe it or not, 2018 will nonetheless be a good year for ICOs.

The regulatory action coming down the pipe will force improvements upon the players and the process, helping to ensure that the ecosystem that remains is better and balanced.

Disagree? CoinDesk is looking for submissions to its 2017 in Review series. Email news@coindesk.com to pitch your idea and make your views heard.

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