There is virtually no investor protection for buyers of tokens. Traditional investors may be used to seeing an extensive list of investor protection, rights and opportunities afforded to them in their many investments. However, the world of ICOs is different than anything we’ve ever seen before, and with that novelty comes new operation standards and expectations.
While it might be difficult for some financial industry experts to fully embrace the implemented changes of blockchain technology and new investment avenues, these changes look like they are here to stay amongst—and possibly overtake—old investment ways. Yes, some people might say blockchain is just a fad—an over publicised much ado about nothing. However, given all of the newfound attention from top-notch innovators and thinkers, I find it hard to believe blockchain technology will disappear anytime soon.
With a massive amount of resources being dumped into (and focused upon) the advancement of blockchain technology, it would do us well to fully understand its nuances. Particularly, as an investor, how do cryptocurrency investments differ from other from other investment types? A whole slew of other questions could probably be asked on the topic of cryptocurrency investment alone. However, for the purpose of transforming you into a well-informed and unfoolable investing machine, we’ll focus now on one question in particular: What investor protection do you have as a buyer?
Investor protection for token buyers
First of all, there are a few different ways to learn about your rights as a buyer and cryptocurrency investor. The first way—which is strictly experiential—involves learning for yourself, entering the unknown, seeing what works and what doesn’t and enrolling in the ‘school’ of hard knocks. It can be done, and I’m sure it has by many, but I certainly wouldn’t recommend it.
This approach, revolving around trial-and-error, can get you to the answer you desire, but will likely result in some damage along the way. Sure, “what doesn’t kill you makes you stronger,” but you’d still be much wiser to take a proactive approach that saves you time, money and heartbreak in the long haul. Don’t get scammed, cheated and/or left out in the dark just because you didn’t want to take the time to read a quick few blurbs about your rights as a cryptocurrency token buyer. It’s not hard, and it might even be a little bit fun, but most importantly, I can almost guarantee you it will be worth it when you find yourself in a sticky investing situation. Make the smart decision.
The rights of token investors
Congratulations, you’ve chosen to read the next paragraph, see what else might be in store and invest in your future; I’m proud of you. Unfortunately, I have some tough news to break to you: your rights are minimal. You see, contrary to traditional investments, cryptocurrency investors and token buyers have a lot less afforded to them in terms of institutional rights and regulations. This is why it’s super important to make sure you know what you’re getting into.
Rights in cryptocurrency investing are pretty individualised; they vary significantly from project to project. One thing that’s usually safe to assume is that you will have the right to eventually sell and/or trade your tokens to a willing buyer. If you don’t have this one right, you’re asking for trouble. What good is an investment that you’re locked into for eternity? Unless you value the act and process of holding—and being bound to—a digital token itself, you should be absolutely certain that you have the right to remove yourself from an investment, cash in on increased market demands and reward your patience. Fortunately, aside from ICO lock-up periods, you don’t have much to worry about here. Investment liquidity will vary, but almost all tokens have a mean of peer-to-peer transfer that can facilitate exchange based on market supply and demand.
Apart from this fundamental right, however, your rights as a token buy will take on a wide range of shapes and forms. This is because ICO purchases are not legally protected on their own. If you’ve entered into a written contract, you may have some rights as a buyer; otherwise, nothing is guaranteed.
In some countries, a simple offer/acceptance/exchange process can establish a contract in absence of a legal document; however, even if a token-issuer states you have rights, nothing is official until bound by law. This includes having the opportunity to vote on company decisions and other happenings. On-the-blockchain smart-contracts can help enforce some promises and give you more rights as a buyer, but these must be pre-programmed to take full effect. In other words, know what you’re getting into with each individual investment; reading up on your rights can save you a lot of confusion.
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Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.