I want to believe. That's not just the caption on a poster in FBI special agent Fox Mulder's office, it's the attitude that's presented in Messari's launch of its open-source disclosure registry.
Beginning with 12 initial partners, Messari's registry "aims to become a single source of truth for basic cryptoasset information," by standardizing the information ICOs make available regarding their token design, supply details, technology audits, official communication channels, and relevant team members, investors, and advisors.
In the much-maligned world of ICOs, it's easy to see how Messari's registry can push back against the murk, clear the air, and help people believe an ICO's claims by making the information easily accessible and generally consistent.
Behind the Curtain
Yesterday, November 27, Reuters published a report investigating the "regulatory gray area" around ICOs, celebrity endorsements, and ICO rating websites. The piece sheds light on the world of celebrity crypto sponsorships, highlighting the Ukrainian startup Hacken as one of the dozens of firms who have paid for positive reviews ahead of an ICO. In 2017, the firm allegedly paid $7,500 to Christopher Greene, the host of Alternative Media Television – a YouTube channel with more than 500,000 subscribers – to post an enthusiastic review of the coin. Greene did not disclose his payment directly in the video, and the coin's value eventually plummeted.
In November 2017, the US Securities and Exchange Commission (SEC) issued a warning about celebrity promotions around ICOs. The SEC stated:
"Any celebrity or other individual who promotes a virtual token or coin that is a security must disclose the nature, scope, and amount of compensation received in exchange for the promotion. A failure to disclose this information is a violation of the anti-touting provisions of the federal securities laws."
The SEC has not been specific about which cryptocurrencies it considers securities, though it has enforced actions against companies connected to ICOs for failing to register.
In addition to the endorsements, the Reuters article covers concerns around ICO review sites. Seven experts at ICOBench, a website that lists and reviews ICOs, told Reuters they had been offered and rejected money in exchange for positive ratings. ICOBench chief executive Maxim Sharatsky admitted the site had had "accidents with sales (of) ratings."
A Step in Some Sort of Direction?
According to the press release, Messari plans to be the sole validator of registry data for the time being, before inviting third-parties to join in its efforts. ETHNews spoke with Ben O'Neill, Messari's director of growth and strategy, who is leading the disclosure registry project, about the platform's timeline for including third-party validators.
O'Neill explained that, while the launch of the project with 12 partners shows there is a desire in the industry for transparency, Messari is working to prove transparency can be achieved:
"The next step is figuring out how to take this to third-party validators and show them that there is a market around this, that this is a place where money can be made by being a validator. With this announcement we already have about two dozen validators that have reached out and wanted to be a part of the validator network we plan to implement throughout the first half of next year."
Messari also published a fact sheet further explaining the steps that will be taken to ensure ICO accuracy. Applying for registration includes a $10,000 application fee, which helps fund the development of the registry. Once the platform is decentralized, projects pay a listing fee of $10,000 annually to remain on the list, with a portion of the fees going to token holders for their validation work, and a portion used to maintain a minimum balance in a bounty contract to ensure disclosure accuracy.
It would be lot of money for an ICO to spend just to falsify facts, which makes the process feel like it has solid legs to stand on, and it adds credence to Messari's efforts to show that a market exists.
As far as how Messari will, well, validate the validators, O'Neill states:
"Ideally, we're going to start with well-known validators to have a group of people we can trust. As much as you can trust people in the industry, you can trust they have a desire to keep their brand reputation positive, be it smart contract auditors, advisors, accountant, investors, people whose brand would be damaged by doing something nefarious – this is our best option for the immediate future. To really open things up, we're thinking about we want the validators to announce – things like who they are, what degree of conflicts they might have – and get to a point where it's not just Messari-validated validators. We want it to be a platform that is self-contained and self-validating."
It's still hard to entirely see past the large ICO review websites littered with paid reviews, let alone the celebrity-sponsored ICOs (disclosed or not). O'Neill hopes that by figuring out how to make ICOs feel less dirty through exposure and updates, the regulatory environment around them will improve.
For now, one can't help but feel like FBI special agent Dana Scully: skeptical, at best, but still wondering if – or at least hoping that – this is the moment where we can believe.