Introduction

A spectre is haunting ‘smart ledgers’, a spectre that a great technological advance for mankind may fall prey to incompetency or fraud, or both, because of a token and coin bubble. A bubble driven by rational and irrational investment, honest optimism and hope, and some lies and scams.

Smart ledgers are the confluence of distributed ledger (aka blockchain) technology with embedded computer code, cryptography, and consensus techniques for validating transactions. Smart ledgers have the potential to organise cooperative forms of commerce & trade less susceptible to central third party monopolies or cheating. Trade reaps economic benefits from specialisation and comparative advantage. Trade creates prosperity, shares success, and enriches our environment. Trust holds all trade relationships together. Smart ledgers help build trust, and thus trade.

Greed & Fear

Where is the new technology that has not created some form of bubble? Bubbles are part of innovation. If we knew how to create innovation without bubbles, it wouldn’t be innovation. Mistakes will be made. Projects and companies will fail. There will be waste. There will be charlatans and crooks, as well as the incompetent, attracted to the desires of people to invest in a new technology that shows so much promise.

Where is the new technology that has not been decried as dangerous by its incumbent opponents? The great potential of this technology risks being put back significantly, denying benefits to billions, if significantly tainted with incompetent delivery or fraudulent schemes. In that eventuality, rightly, expect regulators, the judiciary, legislators, and the public to bear down on the use of smart ledgers.

How to minimise waste and fraud? Both fears have substance in the exponential rise of initial token and coin offerings. Responsible self-regulation is needed. Two suggested areas of action result from this fact:

1. The smart ledger community needs to help clarify the use of tokens and coins in its own best interest;
2. Where tokens and coins have a role, that role needs to meet certain standards, minimal now but evolving as we learn.

Thus, we suggest below for discussion a dual manifesto, an ethical framework and a personal “code of conduct” for token issuers:

‘Ethical Framework’ For Token Issuers

We take the four tenets of Principlism – autonomy, beneficence, non-maleficence, and justice - as our starting point. We combine the four tenets with four City of London commercial principles derived from “Meum Dictum, Meum Pactum”, “my word is my bond” – openness, honesty, transparency, and fairness:

1. Autonomy — Ensure that those offered Tokens are informed of what they are and what they represent, why they are necessary, and have the information needed to determine the Token’s value to them, and are entering into such a relation freely:
   Openness
   Is everyone affected by the Tokens aware of the designers’ and promoters’ intended consequences?
2. Beneficence — Tokens should serve a useful and necessary commercial or social purpose:
   Honesty
   Have we been truthful about actions or decisions with everyone involved, no material omissions, and told no lies or ‘half-truths’?
3. Non-Maleficence — Considered thinking has been done on how to reduce the risks and impact of a failure of the Tokens in whole or part, and to ensure self-sustainability after trading begins:
   Transparency
   Have we been clear and not misleading to any party?
4. Justice — The social distribution of benefits and burdens are seen to be equitable by the parties engaging with Tokens:
   Fairness
   Have we made sure that Tokens will not result in any party being unknowingly disadvantaged or unfairly advantaged, and been fair in token distributions and use over time?

Personal ‘Code of Conduct’ For Token Issuers

1. Trustworthy — To act honestly and fairly at all times, putting first the interests of clients and customers and to be a good steward of their interests and those of counterparties, taking into account the nature of the business relationship with each of them, the nature of the service to be provided to them and the individual mandates given by them.
2. Dutiful — To act with integrity in fulfilling the responsibilities of your appointment and seek to avoid any acts, omissions or business practices which damage the reputation of your organisation, the cyptocurrency, initial coin offering, token, and smart ledger ecosystem, and the wider corporate and financial services world.
3. Lawful — To observe applicable law, regulations and professional conduct standards when carrying out token activities, and to interpret and apply them to the best of your ability according to principles rooted in trust, honesty and integrity.
4. Careful — To observe the standards of market integrity, good practice, conduct, and confidentiality required or expected of participants in markets when engaging in any form of market dealings.
5. Unconflicted — To be alert to and manage fairly and effectively and to the best of your ability any relevant conflict of interest.
6. Competent — To attain and actively manage a level of professional and technological competence appropriate to your responsibilities, to commit to continuing learning to ensure the currency of your knowledge, skills and expertise and to promote the development of others.
7. Contained — To decline to act in any matter about which you are not competent unless you have access to such advice and assistance as will enable you to carry out the work in a professional manner.
8. Aspiring — To strive to uphold the highest personal and professional standards at all times.

Signatories

• Antony P N Abell
  Founder, Universal TrustMe Engine
• Jeremy Barnett
  Director, Resilience Partners Limited and St Pauls Chambers
• Gavin Blem
  Founder, Blockchain Escrow
• Derin Çağ
  Founder of Richtopia and Co-Founder of Marketing Runners
• Dominic Cameron
  Director & CTO (lastminute.com, BBC, Photobox)
• Tim Campbell MBE
  Founder of Bright Ideas Trust and Co-Founder of Marketing Runners
• Neil Cattermull
  Technology Influencer & Analyst
• Jody Cleworth
  CEO, MTI
• John Corr
  CEO, SmartLedger Limited
• Alpesh Doshi
  Founder, Fintricity
• Jonny Fry
  CEO, TeamBlockchain Ltd
• Roger Gewolb
  Founder, Campaign for Fair Finance
• Nicholas Gregory
  CEO, CommerceBlock
• Vinay Gupta
  Founder, Hexayurt | Mattereum
• Simon Halberstam
  Partner and Head of Technology Law , Simons Muirhead & Burton LLP
• Mihai Ivascu
  Founder and CEO, Modex Tech
• Douglas Johnson-Poensgen
  CEO, Cadence Innova
• Matthew Leitch
  Director, Ridgeway Expertise Company
• Per Lind
  Co-founder, IOTA Foundation
• Professor Michael Mainelli FCCA FCSI FBCS
  Executive Chairman, Z/Yen Group
• Trent McConaghy
  Founder/CTO, Ocean Protocol | BigchainDB | IPDB
• Bob McDowall
  Special Advisor, Cardano Foundation (Zug)
• Barbara Mellish ACIB, MBA MIRM
  CEO, Centre for Citizenship Enterprise and Governance
• Emad Mostaque
  Co-Founder, Ananas
• Gary Nuttall
  Managing Director, Distlytics Ltd
• Terry O’Hearn
  Executive Chairman, DasFinancial AG
• Michael Parsons FCA
  Chairman & Executive Director, Cardano Foundation (Zug)
• David Pinto
  Founder, Ecosquared
• Christopher James Pomfret
  Narrator, BullionCoin
• Alex Powell
  Fimatix
• Maury D Shenk
  Managing Director, Lily Innovation
• David Siegel
  CEO, Pillar Project AG Switzerland and 2030 Limited UK
• Jeremy Silver
  CEO, Digital Catapult
• Herbie Skeete
  Managing Director, Mondo Visione
• Chris Skinner
  Chairman, The Financial Services Club
• Karel Striegel
  Founder & CEO, FundRequest
• John Sullivan
  Founder, Oula.la
• Professor Olinga Taeed PhD, FIoD
  Chairman, Centre for Citizenship Enterprise and Governance
• Patrick L Young
  Author, Capital Market Revolution
• Demetrios Zamboglou
  Chief Business Development Officer, Lykke Corp

Not-So-Token Questions For Token Issuers

1. Do your tokens have a necessary, beneficial, commercial or social purpose?
2. Is it clear to everyone what your tokens represent, e.g. shares in a venture, project rights, a future trading coin, a promise of goods or services, a ‘social’ credit?
3. Do your ‘money supply’ rules or algorithms align value with the commercial or social purpose both immediately and over time?
4. Do you have a mechanism to return fairly any excess or unnecessary resources raised?
5. Do you have the professional and technical resources to deliver?

References

• Principlism
• Note significant ‘crib’ from Chartered Institute for Securities & Investment for the Code of Conduct