How Good Crypto Projects Can Avoid Regulators

Opinion, Regulation | May 25, 2018 By:

State and federal regulators have crypto scam artists on the run. And while I commend authorities for protecting consumers, the truth is that a lot of credible projects are suffering as well. Crypto and blockchain startups are saddled in legal fees and are scared to talk more publicly about their projects because of initiatives like “Operation Crypto Sweep.”

Think about it: There is a new generation of tech founders whose primary concern isn’t changing the world with blockchain, it’s how to not get a subpoena from the federal government. And that makes me mad. The federal government should not be stymieing innovation!

And while there are countless companies going through strict compliance, talking to the SEC, and doing commendable due diligence, given the environment we are in, there are more external facing steps every crypto and blockchain company can take to avoid the attention of federal regulators.

  1. Focus on the team and the tech, not the returns – Real investors are going to evaluate the team and the technology your building.  The number one red flag the SEC is looking for is the false promise of guaranteed or can’t miss returns.  
  2. Be transparent and be communicative – Actively monitor your channels and provide frequent updates about your team’s activities.  If a scam artists shows up in your Telegram or Twitter stream, kick them out and flag for everyone’s awareness any bunk offers for free tokens.  
  3. Have a plan in place – Thinking through a crisis response plan is a good step to take in the event the SEC shows up with an informational subpoena.  Sticking your head in the sand isn’t an option when the press comes calling.
  4. Steer clear of pay-to-play, unless it’s clearly marked ‘Sponsored Content’ – There are probably just as many shady Crypto news website as there are ICO scams.  If you are paying for content to run on a website, make sure readers know it’s a paid advertisement and not a real news article.
  5. Don’t plagiarize – You think this one would be obvious, but in 1,450 white papers the WSJ analyzed in their reporting, they found over 111 that copied word-for-word from other project’s content.  

Finally, the industry needs to self regulate better.  Projects need to go above and beyond when it comes to transparency and compliance and focus more on building and less time on marketing or pumping their Telegram channels.  It’s easy to identify the projects who are doing this right and collectively, we need to speak up and call people out when they resort to shameful and slimy practices.  Let’s unleash the power of crypto Twitter for good because we owe it to the regulators to keep our side of the street clean too.  

All kidding aside, this is a serious moment for the future of blockchain and cryptocurrencies and we have one chance to get this right.  The industry needs to act more responsibility and regulators need to strike a more appropriate balance between the future of regulation and enforcement.