The initial coin offering (ICO) community needs to embrace self-regulation now to lessen the blows likely to come from enforcement and regulatory actions, according to speakers at CoinDesk’s Consensus: Invest yesterday.

A crackdown in the U.S. is inevitable, perhaps as soon as six to 12 months from now, warned Charles Hoskinson, CEO at Input Output and former CEO of the ethereum project.

This will likely occur once unsophisticated retail investors start to lose money in the space and run to the Securities and Exchange Commission (SEC) in search of recourse, he said during a panel discussion at the Tuesday conference in New York.

“I do believe there’s going to be some form of enforcement because, basically, what you have now is people offering [cookie-cutter ICO] services. It’s all just semantics and structuring and so forth,” Hoskinson said, adding that, while some projects may withstand scrutiny, many will not.

“When you see these types of structures, maybe some of them are legitimate, but 80 or 90 percent will end up just being ‘me too,'” said Hoskinson.

Shining light?

Given that landscape, Matthew Roszak, co-founder and chairman of Bloq, argued that the ICO community in the U.S. needs to do a better job of self-regulating and self-policing, so that when regulation does come, its effects will be blunted.

Roszak explained:

“There is a lot of froth and crappy ICOs out there. We as a community need to put our best foot forward to say ‘Let’s start thinking about frameworks for best practices and self-regulate ourselves.'”

Another panelist, Olga Feldmeier, chief executive officer of Smart Valor, a blockchain finance startup based in Zug, Switzerland, offered the country’s ICO community as an example. It is in the process of creating a self-regulatory body and a self-imposed code of conduct built around guiding principles such as transparency in vesting.

However, Feldmeier added that the example of Switzerland might not be easily extrapolated to the U.S. because it is a such a small jurisdiction that has a longstanding tradition of self-governance in financial services.

Preventative measure

Roszak, who is a founding member of the Token Alliance – a Chamber of Digital Commerce initiative that aims to develop best practices – added that taking steps now to ensure transparency and auditability, such as lockups during token sales and sound treasury management, will mitigate headaches down the road.

“When [regulators] show up, the pendulum swing is usually overdone,” Rozak said. “But if we as a community say ‘Let’s self-regulate,’ all these things will delay some of that regulatory friction that’s going to be upon us.”

Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Bloq.

Event image via Aaron Stanley for CoinDesk