The Australian Securities and Investments Commission (ASIC) has issued regulatory guidance on initial coin offerings (ICOs).
The regulator clarified that whether the Corporations Act applies to an ICO will depend on the type of ICO offering and the rights attached to the tokens. It said:
“In Australia, the legal status of an ICO is dependent of the circumstances of the ICO, such as how the ICO is structured and operated, and the rights attached to the coin (or token) offered through the ICO.”
According to the information sheet, the ICO will only be subject to the general law and the Australian consumer laws regarding the offer of services or products, while in other cases it may be subject to the Corporations Act. The ASIC said:
“In some cases, ICO issuers may frame the entitlements received by contributors as a receipt of a purchased service. However, if the value of the digital coins acquired is affected by the pooling of funds from contributors or use of those funds under the arrangement, then the ICO is likely to fall within the requirements relating to MISs…If an MIS is being used there are a range of disclosure, registration and licensing obligations under the Corporations Act.”
Furthermore, if an ICO is offering a financial product, the platform that enables investors to buy (or be issued) or sell these coins may involve the operation of a “financial market.” In Australia, such operators may need a market licence unless covered by an exemption.
“ICOs are highly speculative investments, are mostly unregulated, and the chance of losing your investment is high," ASIC commissioner John Price told the Sydney Morning Herald. "Consumers should understand the risks involved, including the potential for these products to be scams, before investing."
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