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Information Paper on ICOs

The corporate regulator has released a new information sheet on Initial Coin Offerings (ICOs).

Last week, the Australian Securities and Investments Commission (ASIC) released Information Sheet 225, Initial Coin Offerings and Crypto-Assets, which will provide information on how the Corporations Act would apply to businesses looking to use ICO’s or crypto assets to raise funds.

In an official statement, ASIC Commissioner John Price said businesses should ‘satisfy’ themselves that they are complying with Australian law. “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,” Price said.

However, the ASIC website confirms the Information Sheet applies to Australian Consumer Law and does cover obligations by other regulators who have oversight on ICOs and crypto assets.

In 2017, the corporate regulator issued guidance in this space for the first time with an earlier version of Information Sheet 225.

At the time, Price said that, “We want to ensure innovative firms understand the regulatory framework under which they may be operating and ensure they meet any obligations they may have when raising funds in Australia.”

In 2017, at the IOSCO Growth and Emerging Markets Committee meeting held in Sri Lanka, ASIC Chairman at the time, Greg Medcraft, made a call to those businesses looking to utilise ICOs and crypto assets to come to ASIC’s innovation hub so the regulator could help them gain a better understanding and to do a better job of navigating the regulatory framework. Of course, this was in the context of the impact of fintech on capital markets.

Late last year, ASIC publicised taking action against misleading ICOs and crypto asset funds targeting retail investors. The regulator said that, in five separate matters, they found ICOs raising capital without the appropriate investor protections.

When it comes to what they have described as a completed ICO, ASIC said they issued a stop order on the product disclosure statement issued by Investors Exchange Limited, which the company subsequently acknowledged and were ultimately cooperative.

“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,” Price said.

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