How Russia's ICO-hub System Could Transfer Decision Power to ICO Investors
Reports on Russia's media platform, Izvestia, indicate that the country will be launching a system called ICO-hub to guarantee investments in initial coin offerings (ICOs) this year. The system will be developed in partnership with several players including the Globex Bank, an auxiliary of Vnesheconombank (VEB), a bank owned by the government, CrowdHub platform and Russian Association of Cryptocurrency and Blockchain (RACIB).
Alexander Mineev, the head of remote banking service and e-commerce development at Globex, says the ICO-hub could be ready for trials as early as this month.
If launched successfully, ICO-hub will allow investors to monitor how ICOs implement their projects and decide on whether funds raised should be transferred to them or projects liquidated and remaining funds redistributed to investors.
While this move will guarantee security of investor funds, ICO companies fear that it could work against them because ordinarily, a wide range of investors may not understand complex ICO projects.
"The current ICO model is flawed and the majority of ICO activity is very difficult to interpret by the vast majority of people out there," notes Steve Dryall, Founding Director at Niko Coin.
Through the system, companies running ICOs to raise capital will be able to receive investments in both fiat and cryptocurrency. In the partnership, Globex creates escrow accounts to receive fiat money while CrowdHub creates digital wallets to receive cryptocurrency for ICO companies.
The system has the potential to assert accountability in the way ICOs implement their blockchain-based projects. However, on the flip side, it could halt the implementation of viable projects where investors fail to understand some aspects.
Roman Guelfi-Gibbs, CEO at Pinnacle Brilliance, says, "There are certainly pros and cons to Russia's system. Giving investors direct control over what happens with their invested funds has the potential to keep projects honest and productive. However, if the public doesn't understand aspects of a project and then choose to withhold funds, that could be catastrophic. Managing trading accounts for years has taught me to set up strict boundaries with clients and investors."
Besides providing options for fiat and digital currency, ICO-hub appears to be an avenue for the government to give investors the power to determine which ICOs are viable and which ones are not.
Dominic Brown, COO at DocTailor, says, "Governments are aiming to implement strategies to give power to the people so they can decide for themselves if a project is truly viable. The issue that I potentially see with this majority system is that some will feel as though there could be possible collusion to make certain results occur as opposed to the wild west of the completely free market that we have now. I do not see a major issue myself with this but I see room for mistakes to happen and people becoming extremely unhappy."
Disclaimer: David Drake is on the advisory board for most of the firms mentioned or quoted in this article.