Blockchain: Code of Conduct for Initial Coin Offerings

On 8 January 2018, the Crypto Valley Association (“CVA”), a Swiss based non-profit organization, published a Code of Conduct for Initial Coin Offerings (“ICO CoC”). These guidelines should ensure that certain standards regarding compliance with relevant financial market regulations, enforceability and quality are adhered to in connection with ICOs. The ICO Code of Conduct is expected to bring clarity and confidence to the still new, rapidly-growing asset class.

| Christian Maeder, Paul Thalmann

ICO Code of Conduct

The Swiss Crypto Valley Association is supporting the development of blockchain and cryptographic related technologies and businesses. The following ICO CoC should serve as a guidance for ICO’s to conduct properly and to take all legal, moral and security obligations into account:

A. Decentralized ecosystem (“DE”) information
Members inform the community on their web interface, or any other communication channel, in a credible, objective and timely way about their DE and its innovative character, including about its technical features, development and financial plan, implementation timeline, benefits and risks (see below “B”), the management team, their professional background, their role in the DE, and about the legal structure, corporate organization and governance framework, storage and access of crypto assets – as applicable.

B. Risks Assessment and Disclosure
Members undertake, disclose on their web interface, or any other communication channel, and keep updated a full assessment of the risks related to the underlying technology (functionalities, protocols), the storage and access of private keys, the regulatory, compliance (such as KYC, AML risks), market and counterparty risks. The assessment shall be explicit about the mitigation measures implemented or foreseen and shall highlight the residual risk. The members ensure that all community members participating in the DE are fully aware of the risks associated with the specific DE.

C. Contribution and Distribution

C1. Pre-Blockchain Deployment Contribution
Members ensure that the pre-deployment contribution phase unfolds within a (preferably independent) audited corporate and technical structure that grants the highest protection and compliance levels to contributors. No public sale shall be allowed at this stage.

C2. Blockchain Deployment and Distribution
Members ensure that the blockchain deployment and subsequent distribution phase (secondary market) are subject to highly secured, fully compliant and documented, and independently audited technical allocation systems (such as smart contracts). Members shall exercise every effort to comply with the relevant regulations of the jurisdictions in which they actively distribute their DE.

C3. Minimum Contribution Disclosure
Members ensure all time transparency about the functionalities of the token (such as utility features, governance rights, counterparty, output and input functions), applicable regulations, issuance protocol and schedule, pricing mechanism, relevant taxation regime, contributor-based differentiations, sequential implementation of functionalities and listing plans, buy-back programs, existence of floors, envisaged burning and creation policy, treatment of any excess funding, and existence of lock-up periods for funds attributed to management. Members seek direct or indirect regulatory contact as needed to guarantee best possible certainty.

D. Records Management
Members manage, trace and archive all transactions properly and according to prevailing laws and best financial practices. Members shall have a risk based policy in place on the KYC level they implement for the contribution and operation phase. The CVA regards it as best practice to have a minimum KYC procedure (name, address, id-scan, mail and/or mobile no) as well as an information of the source of funds procedure in place.

E. Suitability
Members make sure that the promotion of the DE is fair, clear and not misleading, and are proactive in helping contributors to understand the technology, the risks and rewards in relation to their specific risk appetite.

F. Independent Verification
Further to C, above, members disclose post contribution a comprehensive audit report.

G. Breaches and Disciplinary Action
The provision of Art. G of the CVA CoC applies (see above).


Whereas in 2017 around 450 ICO’s were undertaken worldwide, it is expected that this number will increase to around 3000 in 2018. In view of such huge growth regulators become increasingly concerned about the lack of formal governance rights of decentralized ecosystems, investor protection and anti-money laundering regulations. For example, several ICO’s have concealed in the past their malevolent scheme by a lack of transparency and by making it difficult for token buyers to identify such risks. According to the general principle “same risks same rules” appropriate regulation needs to be developed that is not hindering but supporting the crypto industry. Therefore, we very much support the promotion of a fair and transparent crypto-ecosystem by the CVA and the new CoC as a next step in the development of a suitable self-regulation.

The content of this newsletter does not constitute legal or tax advice and may not be used as such. If you need advice with regard to personal circumstances, please reach out to your contact person at Reichlin Hess AG or to the authors of this newsletter.

Christian Maeder
Attorney at Law, Certified Tax Expert
[email protected]
Paul Thalmann
Attorney at law, Notary Public
[email protected]

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