We shouldn’t fear anymore that scams steal our chicken — like it happened to widow Bolte in this famous Max&Moritz scene from Wilhelm Busch.

The cryptocurrency market has experienced an unprecedented boost in terms of market capitalisation and size in 2017. The main driver for this big leap, in addition to the price increases of already well-established cryptocurrencies such as Bitcoin or Ether, has been the emergence of a new type of crowdfunding, also known as ICO (Initial Coin Offering) or ITO (Initial Token Offering). The amount of capital raised by ICOs has now reached such an extent that it has even leapfrogged the volume raised by early-stage venture capital (VC) funding. The market has thus reached a threshold which needs to be considered material with regard to startup funding.

Given that size, what has been done so far from a regulatory standpoint? Switzerland’s regulatory- and tax law recently gained momentum in the qualification of token issuances by ICOs. The Swiss Financial Market Supervisory Authority (FINMA) has announced in a pleasantly sober manner that it pursues an economically functional approach — meaning the regulatory consequences of issuing tokens hinge on the token functionality, not on its declaration by the ICO promoters.

After an initial ambiguity, we now have also more lucidity on the tax side. The token sale itself should not trigger any profit tax on the company level as long as a corresponding provision can be justified, either for the development costs of the digital protocol or for future repayments to the investors.

In spite of all the positive news surrounding this development, there are still plenty of problems in the cryptocurrency- and ICO market such as ICO exit scams or opacity on the milestones tracking of projects. Could a prudential regulatory approach resolve these issues? I claim no! Firstly, since we live in a decentralised world, a centralised jurisdictional-bounded regulation cannot be the solution (except for the utopian case that all regulators work together on a global scale). Secondly, regulators mostly focus only on the legal part of ICOs. They do not conduct a proper due diligence on the technical, business, and governance dimensions for a blockchain-based project. Thus, the market needs a sort of self-regulating mechanism such as an independent and objective blockchain-asset rating agency (yes, this is what we are doing) in order to complement the current regulatory development yielding to a growing up cryptomarket.

Sure, there are several individuals and projects that rate ICOs and blockchain-assets, but virtually none of them appears to be really trustworthy. There is always a way to bribe a premium placement, promote a project, etc. Or their methodology is based on highly unreliable factors like Telegram users or includes things like a “hype-factor”. With Alethena we establish a rating that is designed to avoid any potential conflict of interest and rates blockchain-assets with a professional, scientific, and transparent methodology.

Eventually, having a growing up cryptomarket means that there needs to be a symbiosis of regulatory, technical, business, and governance measures to appropriately assess the potential of a blockchain project. And Alethena constitutes one part of that symbiosis!