Half of ICO Money in Russia Ends in Fraud Schemes, RACIB

Cryptocurrency association drafts rules for ICOs transparency and protection of investors .

by Marin Marinov
23 April • 4 min
In News

Half of the money, raised by Initial Coin Offerings (ICOs) in Russia last year, went to financial pyramids, the Russian Association of Cryptocurrency and Blockchain (RACIB), estimated.

The crypto self-regulatory body RACIB is preparing rules for protection of investors and bringing transparency to the sector, the local newspaper Izvestia reported on Monday.

Russian individuals and companies invested USD 300 million in ICOs in 2017 but around USD 150 million went to fraudulent schemes. ICO fundraising in Russia represents some 10% of the global market with USD 1-1.5 billion in investments expected for this year, according to RACIB data.

Self-regulation RACIB is drafting a package of rules for the ICOs in an attempt to improve the trustworthiness of the sector. The standards will include an obligatory white paper and business plan with disclosed minimum rate of investment return.

one man, sitting in front of a computer, in a dark room

RACIB will check if the companies behind ICOs have own websites with credible information about the project teams and their past experience in startups. The association will also examine the sites for plagiarism related to other ICOs.  

The crypto community body will set up a special division for checking if the ICOs comply with the rules. Those measures will be self-regulatory and obligatory for RACIB members. It is not clear yet if the association will examine ICOs of non-members. RACIB was established in August 2017 and currently has 64 members including crypto miners, individual investors) and crypto-related companies.

“Cryptocurrencies have begun to take their place in the financial market by being used in exchange transactions, including as a payment method. Whatever the regulatory authorities say, life develops faster than legislation”, RACIB president Yuri Pripachkin, told state-run Sputnik radio station on Monday.

two big coins with different colors and letters

“This and the next year will be a period of opportunities because the crypto industry will take a position of one of the key players in the new [digital] economy,” Pripachkin added.

Regulation or self-regulation

Some Russian experts believe that ICO investments are highly risky and only “qualified investors” should be allowed to participate in these fundraisings.

 “Citizens can lose money not only because an ICO project is fraud, but also because they don’t understand cryptocurrencies very well,” Teimuraz Vashakmadze, researcher at the Russian Presidential Academy of National Economy and Public Administration, told newspaper Izvestia.

 “Indeed, it is better if market participants are engaged in developing industry quality standards, educating users, explaining risks and hidden problems… but the state can protect investors only when the definitions of cryptocurrencies, tokens and ICO is introduced in legislation”, Michael Schapov, member of the Russian Parliament told local news website “Politics today”.

Draft crypto bill

RACIB revealed their plan for self-regulation measures after a draft crypto bill was published on Saturday. The Council of Ministers generally approved the proposed bill (available in Russian language here) that will regulate the cryptocurrencies, the ICOs and the mining process, but recommended some changes such as the introduction of taxes for digital transactions and regulatory control over virtual currency deals above USD 10 000 as well as precise definition of the terms “cryptocurrency”, token” and “mining”.

RACIB is one of the authors of the draft bill along with the Financial Ministry, the Central Bank and several members of Parliament.