The Chamber of Digital Commerce, a blockchain advocacy group, announced today the formation of the Token Alliance, an industry-led initiative to promote and shape the responsible growth of token and digital asset sales.

The focus of the new alliance is to bring a measure of responsibility to token crowdsales and initial coin offerings that have become a controversial cornerstone for blockchain startup funding. The Token Alliance is made up of former regulatory leaders from U.S. securities bodies and more than 70 industry-leading organizations currently exploring blockchain technology and digital assets, including Microsoft Corp., Bloq, Qtum, Netki Inc. and Node40 LLC.

With rising interest in digital assets produced by companies adopting cryptographic distributed ledgers, also known as blockchain technology, and companies seeking funding by selling those assets in what are called initial coin offerings, the regulatory bodies of many nations have slowly begun to stir.

The U.S. Securities and Exchange Commission released a ruling regarding the hack of the Ethereum Decentralized Autonomous Organization, or DAO – which had approximately $55 million in assets stolen in June 2016 — that the assets minted by the organization amounted to securities under U.S. law. The ruling, released by the SEC in July, found that token sales such as the one by the DAO could require registration with the SEC for offering securities, a ruling that could affect many such crowdsales in the U.S.

“With the SEC’s recent findings regarding ICOs, combined with the CFTC’s determinations and enforcement, it is clear that proactive industry efforts are imperative and timely,” said Jim Newsome, former chairman of the U.S. Commodity Futures Trading Commission and co-chair of the Token Alliance.

Token sales or initial coin offerings, called ICOs for short, have become a powerful tool for startups to fund themselves through crowdsales of a platform’s own internal tokens or currency. In 2017, more than 100 token sales raised over $1.5 billion for technology companies seeking to change everything from the financial technology market to online voting.

In July, blockchain startup Tezos made a record-breaking fundraiser with an ICO that raised over $230 million. This followed a few others such as $35 million raised for Brave, a privacy-enhanced browser developed by former Mozilla Foundation Chief Executive Officer Brendan Eich, and $5.2 million raised by Humaniq, financial services blockchain company.

CNBC recently reported that ICOs had surpassed early-stage venture capital funding during June 2017 and that the activity had similarities to the practice of an initial public offering on stock exchanges.

Some recent ICOs have also been fraught with their own problems such as thefts similar to what happened to the Ethereum DAO mentioned above. Approximately $31 million worth of the cryptocurrency Ethereum was stolen from ICO companies in July by hackers. Mere days later CoinDash, a startup looking to build a blockchain asset social trading platform, lost approximately $7 million in tokens stolen from its ICO fundraiser.

In many countries, these crowdsales exist in a legal twilight where the regulations that cover digital business assets and crowdsales are still forming. In light of the potentially problematic nature of ICOs, China banned the practice in early September pending a review and possible introduction of regulations. The United States may not be far behind in implementing its own regulatory actions regarding these types of asset sales.

“The Token Alliance will serve a much-needed role in helping the industry establish for itself appropriate guidance for this new and exciting asset class,” said Paul Atkins, former SEC commissioner and also co-chair of the Token Alliance.

The initial participants of the Token Alliance is comprised of more than 70 organizations, including the following: Alluminate, AlphaPoint, Bankcoin Global, Blake Cassels and Graydon, Bloq, CMT Digital, Cognizant, Cooley, Crowell and Moring, Elliptic, Gem, Hashed Health, Loyyal, Microsoft, Netki, Node40, Parsons and Whittemore, Perkins Coie, Polsinelli, Qtum, Reed Smith, Rimon Law, Rivetz, Steptoe and Johnson, t0 and Tally Capital.

“As with all new technologies, it is important to set appropriate guidelines to curb potential abuse, while protecting innovation,” said Perianne Boring, founder and president of Chamber of Digital Commerce.

The Token Alliance is open to new members from across technology, legal advisory and other industries that have an expertise in blockchain technology. The group is interested in bringing together as many industry participants as possible alongside regulatory leaders to help bring the industry into alignment with current laws and best practices globally.

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