ASIC releases information on Consumer Protections that apply to Cryptocurrencies and ICOs | Irish Bentley Laywers
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On 30 May 2019, a media release by the Australian Securities and Investment Commission (ASIC) released new information regarding cryptocurrency assets and Initial Coin Offerings (ICOs), seeking to assist businesses in considering their legal obligations and to ensure they are operating lawfully.

 

Styled to sound like an Initial Public Offering (IPO) where shares of a company are first offered to the public, an ICO is the initial release of tokens of a cryptocurrency. In recent times ICOs have raised millions of dollars for cryptocurrency developers, leading to it becoming a new source of capital raising for companies wishing to create their own digital token.

 

ASIC indicated that they updated Information Sheet 225 Initial coin offerings and crypto-assets (INFO 225) based on their recent experiences which has shown that crypto-assets often are financial products, or involve financial products, that are regulated under the Corporations Act 2001 (Cth). Further, crypto-asset trading platforms can become financial markets, and thus be subject to ASIC regulation.

 

Despite the roaring success of many ICOs, many cryptocurrencies released through ICOs have been based on flawed or plagiarised code, leading to claims that the majority of ICOs are scams designed to attract optimistic investors and then to disappear once the initial hype disappears.

 

ASIC Commissioner John Price said as a minimum the prohibitions against misleading or deceptive conduct under Australian Consumer Law still apply in the digital space. Further, Australian laws will still apply even if the ICO or crypto-asset is promoted or sold to Australians from offshore. ASIC has stated clearly that use of the technology would not allow key consumer protections to be ignored.

 

Written by

Matthew Brouwers (LL.B, GDLP, B.BM)

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