By Michael Bacina and Sina Kassra -
Snapshot
- The Australian Securities and Investment Commission has released guidance on Initial Coin Offerings/Token Sales.
- The details of such offerings will determine whether they fall within existing licensing and regulation requirements under the Corporations Act 2001.
- Those wishing to be involved in such offerings will need to ensure they are either licensed or carefully structured to be outside the requirements for licensing.
The Australian Securities and Investment Commission (‘ASIC’) has issued a press release and guidance for those considering launching an Initial Coin Offering (‘ICO’) or Token Sale of cryptocurrency coins (‘Token Sale’). Given the ease with which a Token Sale can be launched, and the huge amounts raised to date (US$3 billion this year alone), ASIC’s guidance has been eagerly awaited.
While Australia has not banned Token Sales, anyone looking to issue cryptocurrency tokens to Australians will need to be careful they don’t fall foul of the Australian regulatory landscape, which is markedly different from the US system.
The information sheet, descriptively named INFO225 reiterates a similar position taken by the US Securities and Exchange Commission, namely that the legal status of a Token Sale will depend on the circumstances and features of the cryptocurrency tokens being offered for sale.
ASIC Commissioner John Price spoke the obvious in saying: ‘ICOs are highly speculative investments, are mostly unregulated, and the chance of losing your investment is high. Consumers should understand the risks involved, including the potential for these products to be scams, before investing.’
While Token Sales are generally considered a form of crowdfunding, ASIC has made clear that it does not consider that Token Sales will fall under the new Australian crowdfunding regulatory framework which commenced 29 September 2017. That crowdfunding framework permits licensed operators to raise capital in exchange for equity in public and private companies (subject, of course, to various requirements).
