ASIC set to adopt stricter stance on ICOs and cryptocurrencies

Maria Nikolova

Commissioner John Price slammed the perception that Australian regulations don’t apply or can be avoided by engaging in an ICO from overseas.

The Australian Securities and Investments Commission (ASIC) will be revising its stance on initial coin offerings (ICOs) in the coming weeks. This becomes clear from a speech delivered by ASIC Commissioner John Price on Thursday, April 26, 2018.

Mr Price noted that ASIC is determined to see Australia’s innovative fintech and regtech flourish in the right regulatory environment but he stressed that “ASIC must be focused on both protecting Australian consumers and facilitating innovation across the financial services industry”.

Last year, ASIC released Information Sheet 225 Initial coin offerings, which provides guidance for entities considering an ICO. The document briefly explained that the legal status of an ICO is dependent on the circumstances of the ICO, such as how it is structured and operated as well as the rights attached to the token.

”Regardless of the structure, however, there is one law that will always apply – you can’t make misleading or deceptive statements about the product. This is going to be a key focus for us going forward”, John Price said.

The information sheet further explains that where a token offered through an ICO is a financial product, additional laws may apply. For example, an ICO could be a managed investment scheme, or an offer of shares. Mr Price added that platforms that enable trading in tokens that are financial products may well be financial markets.

ASIC will be making some updates to the information sheet in the coming weeks, he said.

The regulator will include questions that it feels should be explained to all potential investors, consumers or users. ASIC will also expand the scope of the information sheet to include more on cryptocurrencies.

”We will highlight that Australian corporate and consumer law might apply – even if the ICO is created and offered from overseas”, John Price said.

In addition, the regulator will also highlight information on how Australian law prohibiting misleading or deceptive conduct will apply in this space.

“There exists a perception that Australian regulations don’t apply or can be avoided by engaging in an activity from overseas. I cannot stress enough that if you are doing business here and selling something to Australians – including issuing securities or tokens to Australian consumers – our laws here can apply”, Mr Price said.

Mr Price warned about the opportunistic mood dominating in ICOs – including businesses or people looking to undertake an ICO because it is seen as an easy, low regulation and low cost option which could lead to immature businesses coming to market.

Digital currency exchange businesses are required to register with Australia’s financial intelligence agency AUSTRAC, under new rules.

In mid-April 2018, AUSTRAC sought to draw the difference between being a registered entity and being endorsed. the agency said that the registration by AUSTRAC of a digital currency exchange or remittance service provider does not constitute an endorsement of that business or compliance with any anti-money laundering and counter-terrorism financing (AML/CTF) obligations.

The agency warned that businesses must not use their registration status in any way that suggests AUSTRAC or the Commonwealth Government endorses them or any of their services or products. Words including ‘endorsed’, ‘approved’ or ‘licensed’ are examples of inappropriate wording.

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