As financial regulators around the world issue warnings about initial coin offerings (ICOs), the Australian Securities & Investments Commission (ASIC) has released their own guidelines for businesses who are considering raising funds through ICOs.
ASIC, which serves as Australia’s corporate, markets and financial services regulator, is tasked with the job of ensuring that the country’s financial markets are fair and transparent for consumer trust and confidence.
In light of the global interest in the use of ICOs, the ASIC is aiming to help businesses understand their potential obligations under the Corporations Act 2001.
The guidelines read:
ASIC recognises that ICOs have the potential to make an important contribution to the options available to businesses to raise funds and to investment options available to investors.
However, it adds that an ICO must be conducted in a manner that promotes investor trust and confidence. It must also comply with the relevant laws.
According to the guidelines, the legal status of an ICO in Australia depends on the circumstances of it. For instance, how the ICO is structured and operated as well as the rights attached to the coin or token offered through it.
In some cases, the ICO will only be subject to the general law and the Australian consumer laws regarding the offer of services or products. In other cases, the ICO may be subject to the Corporations Act.
In order to ensure that the public are not misled, ASIC makes clear that crowdfunding using an ICO is not the same as crowd-sourced funding (CSF), which will be regulated under the Corporations Act from the 29 September.
Under the new laws CSF will be a financial service, often including a platform or market, where start-ups and small businesses raise funds, generally from a large number of investors that invest small amounts of money.
For companies who are considering raising funds through an ICO, but aren’t sure whether they are subject to obligations under the Corporations Act, they are advised to contact ASIC’s Innovation Hub.
ASIC can see the benefits and risks of the ICOs and would be willing to engage those in the area.
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