The urgency to improve transparency in the crypto market: Token frameworks may become the new industry standard

The cryptocurrency industry has a history of over a decade and is at a crucial turning point. Although some crypto companies are beginning to seek IPOs, there are still serious transparency issues in the Token market that hinder the industry's development. Tokens are seen as an important direction for future capital formation, but if the transparency issues are not resolved, the industry will find it difficult to move forward.

The current Token market is facing the dilemma of a "lemon market". The lack of an effective information disclosure mechanism makes it difficult for investors to distinguish between high-quality projects and low-quality projects, leading to an overall decline in market quality. In this environment, Token investors face many issues that equity investors do not have to worry about: insufficient legal protection, multiple Token issuances harming the interests of early investors, unclear distribution of Token and equity returns, lack of transparency in founder behavior, and abuse by foundations, among others. These structural issues significantly increase the risk premium of Tokens, resulting in a serious undervaluation of Tokens.

Frequent chaos in the industry, such as project parties arbitrarily stripping IP and cash flow, refusing to distribute profits to Token holders, and founders excessively cashing out, etc. Some of these problems stem from regulatory gaps, while others are intentional actions by the founding team. Some projects abuse funds using the foundation system or sign opaque agreements with market makers to manipulate prices. These behaviors severely harm the interests of investors and also reduce market confidence in Tokens.

To address these issues, industry insiders have proposed a Token transparency framework. This is an open, standardized self-disclosure template that requires project parties to answer approximately 20 questions covering business descriptions, supply timelines, exchange agreements, and more. The framework uses a scoring mechanism, assigning different weights based on the importance of the questions, ultimately generating an easily understandable rating assessment. This framework aims to encourage project parties to proactively disclose information, allowing the market to judge the quality of the projects on its own.

In the long term, this framework is expected to drive the industry towards greater transparency and trustworthiness. Projects that participate and receive reasonable ratings may gain a premium due to increased transparency, attracting more institutional capital. Conversely, projects that lack real products or abuse market structures may be eliminated from the market due to a lack of transparency.

As the encryption industry continues to mature, increasing transparency and regulating market behavior will become key to the industry's development. The proposal and promotion of the Token transparency framework may become an important step in promoting the healthy development of the industry.