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ASIC, Australia’s regulatory commission, has issued formal guidance for businesses trying to raise funds through ICOs.
A regulatory guidance for businesses has been issued by the Australian Securities and Investments Commission (ASIC) marking the launching of initial coin offering (ICO).
The legal treatment for the usage of ICOs will depend on the natural structure of the cryptographic tokens, according to a document on the regulator's website.
More so, the token sales will be categorized under general Australian consumer law given that the ICO structured company is not offering financial products as this will be regulated under the country's Corporations Act.
Part of the ASIC statement reads:
"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 MIS managed investment schemes. This is often the case if what is offered through the ICO has the attributes of an investment.”
The law issued by the ASIC will carry some protections for investors, but if an ICO fails to meet the required definitions, that may not be the case.
There are other regulations and guidelines the ICOs need to follow depending on its structure as noted earlier. One of the regulations include if an ICO is considered an MIS, there is a "range of disclosure, registration and licensing obligations under the Corporations Act," the document says.
ASIC commissioner John Price told the Sydney Morning Herald that, if the tokens are not financial products,
“investors will need to closely consider the ICO documentation as the investor protection regime under the Corporations Act will not apply."
Furthermore, for ICO financial products, the operator may also require a market license in order to sell tokens. The ASIC statement gives a warning to the ICO white papers to not issue misleading or unclear statements to the consumers as this is prohibited by the law.
Approximately $797 mln was raised by ICOs in the second quarter of this year, according to Mashable.
Australia has recently moved towards legalizing Bitcoin as well as ending double taxation to cryptocurrencies.
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