System to Guarantee ICO Investments Being Built in Russia

A system to guarantee the investments in initial coin offerings (ICO) is being built in Russia by Globex, a commercial bank subsidiary of the state-owned VEB bank, and the Russian Association of Cryptocurrency and Blockchain.

Also read: Indians Look to Buy Bitcoin Overseas as Regulations Tighten

System of Guarantees

“The first system of guarantees for investments in cryptocurrencies in Russia,” is being put together, according to local newspaper Izvestia.

Globex, the commercial bank subsidiary of the government-owned development bank VEB (Vnesheconombank), is working together with the Russian Association of Cryptocurrency and Blockchain (RACIB) and its partner website Crowdhub to create the system. Crowdhub is a joint project between Denis Dusnov, RACIB’s vice president for the implementation of the escrow mechanism, and the association itself.

RACIB director Arseniy Shcheltsin told the news outlet that an ICO hub will be created with “a system of guaranteeing investments in cryptocurrency start-ups.” According to the project development plans, the system will “help investors to make stage-by-stage payments.”

The legal protection mechanism is yet to be worked out. The system, once completed, will be tested for at least three months while RACIB collects statistics on any token sales to improve the functionality of the hub, Dusnov told the publication.

Alexander Mineev, Globex’s head of the department for the development of e-commerce and remote banking services, was quoted stating that “the project will start in March, then the strategy of its development will begin to be worked out.”

How the System Will Work

According to Finmarket publication, RACIB will recommend its participants to raise funds through the ICO hub.

Companies wanting to raise money would then register on the Crowdhub website, open an escrow account with Globex, and obtain a cryptocurrency wallet. Investors wanting to invest in an ICO project will also register on the Crowdhub website. Their funds will then be deposited in the ICO issuer’s escrow account at Globex, the news outlet detailed.

“To monitor the costs and implementation of a particular project, there will be successive groups of investors,” the publication wrote, adding that:

If they [investors] find that the project is going according to plan, then they vote for the transfer of part of the money raised for the implementation of subsequent stages. If more than 51% voted against, the balance of funds is redistributed between investors and the project is liquidated.

Meanwhile, lawyers are skeptical about a system of guarantees applied to ICOs. Head of the tax practice of KSK groups Dmitry Vodchits voiced concerns that “there is no mechanism for legal protection of investors’ rights – it is unclear what courts to handle if disputes arise.”

Lenam Rakhmanov, co-founder of a cryptocurrency fund called Statum, believes that “the absence in Russia of legislation in the field of crypto-currencies should not prevent the creation by market participants of their own standards and rules of conduct that do not violate existing legal norms,” the news outlet conveyed.

The Russian Ministry of Finance recently published a draft bill proposing that the maximum amount of funds that can be raised by an ICO be limited to 1 billion rubles (~USD$17.7 million), as news.Bitcoin.com previously reported.

Do you think this system will work to protect investors? Let us know in the comments section below.

Images courtesy of Shutterstock and Globex.

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