RANEPA experts help write OECD report on ICO
The RANEPA Center of Competence and Analysis of OECD Standards and the Russia-OECD Club at the Russian Foreign Trade Academy have released an analysis and overview of the OECD 2019 ICO for SME Financing report.
The Russia-OECD Center experts were involved in writing the ICO report at the OECD; as a result, the report contains information on Russia and the Eurasian Economic Union. The OECD released its ICO for SME Financing report in January 2019.
The OECD report defines the concept of the Initial Coin Offering, ICO, (token issue) economy and considers the specifics of ICO structuring and token sale models (fixed price sales, auctions, reverse auctions and hybrid forms), etc.
According to OECD, the ICO economy should be determined and disclosed to potential participants well in advance so that they could estimate the value of tokens. However, this rule is not always respected in practice. The low cost of issuing tokens is the key advantage of ICO funding. Although an ICO includes costly legal, financial, insurance, and marketing services that significantly increase the overall costs, it is still a cheaper way to raise funds compared to an IPO.
In its report, OECD highlights ICO advantages for small and medium enterprises (SMEs): first, the owners can raise capital without diluting their stake in the company; second, tokens can be divided into smaller fractions (for example, 0.000001 of a token), which makes the system more flexible and widely affordable; and third, the smart contracts used in ICO ensure the automatic fulfillment of the contract terms, guaranteeing the integrity of its execution by the parties. However, the lack of a clear regulatory policy limits SMEs’ participation in ICO.
OECD indicates that, on average, an ICO project yields around $6.4 million, with an average return of 48% for an investor in a one-week listing of a successful ICO project. Meanwhile, the level of fraud in the market, according to various estimates, ranges from 0.5% to 80%, depending on the assessment methodology.