ASIC’s recent experiences with ICOs and crypto-assets show they often involve financial products

Maria Nikolova

ASIC notes that regardless of whether a financial product is involved in the fundraising, the prohibitions against deceptive conduct under Australian Consumer Law apply.

The Australian Securities & Investments Commission (ASIC) has published new information to advise businesses involved with initial coin offerings (ICOs) and crypto-assets on how to meet their legal obligations.

ASIC has updated Information Sheet 225 Initial coin offerings and crypto-assets (INFO 225) based on its recent experiences with ICOs and crypto-assets. These experiences indicate that ICOs and crypto-assets will often be financial products or involve financial products that are regulated under the Corporations Act.

ASIC Commissioner John Price said, ‘Businesses offering crypto-assets, or offering services in relation to crypto-assets, need to undertake appropriate inquiries to satisfy themselves they are complying with all relevant Australian laws.

‘As a minimum, regardless of whether a financial product is involved in the fundraising, the prohibitions against misleading or deceptive conduct under Australian Consumer Law apply.

‘Australian laws will also apply even if the ICO or crypto-asset is promoted or sold to Australians from offshore. Issuers of ICOs, crypto-assets and their advisers should not assume the use of these structures means that key consumer protections under Australian laws do not apply or can be ignored’, Mr Price said.

Issuers of crypto-assets that are issuing crypto-assets such as tokens that fall within the definition of a ‘financial product’, will see Australian laws apply, including the requirement to hold an Australian financial services (AFS) licence.

Crypto-asset intermediaries that are giving advice, dealing, or providing other intermediary services for crypto-assets that are financial products need to know that a range of Australian laws apply in their case, including the requirement to hold an AFS licence.

Miners and transaction processors have to consider that in cases where miners and transaction processors are part of the clearing and settlement (CS) process for tokens that are financial products Australian laws apply.

Crypto-asset exchange and trading platforms need to know that if the platform deals in crypto-assets that are financial products, then the platform is operating a market and a range of Australian laws apply, including the requirement to hold an Australian market licence. Depending on how transactions in crypto-assets that are financial products are cleared and/or settled, the platform may also be operating a CS facility and require a CS facility licence.

Crypto-asset payment and merchant service providers whose services involve a ‘non-cash payment facility’ need to know that a range of Australian laws apply in their case, including the requirement to hold an AFS licence.

Wallet providers and custody service providers should have in mind that if tokens stored by their business fall within the definition of a ‘financial product’, they need to ensure they hold the appropriate custodial and depository authorisations.

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