In May 2019 the Australian Securities and Investments Commission (ASIC) issued Information Sheet 225, “Initial Coin Offerings and Crypto-Assets” (IS 225). IS 225 provides helpful guidance for Australian entrepreneurs considering whether to raise funds through an initial coin offering (ICO) and for businesses that are involved with crypto-assets such as cryptocurrency, tokens or stable coins in Australia.
IS 225 discusses several topics, including:
- What should you consider when offering crypto-assets through an ICO?
- What is misleading or deceptive conduct in relation to an ICO or crypto-asset?
- When could an ICO be or involve a financial product?
- When could a crypto-asset trading platform become a financial market?
- What about financial products that reference crypto-assets?
- How do overseas categorizations of crypto-assets translate to the Australian context?
According to ASIC, in many cases crypto-assets will be subject to regulation under Australian securities laws, employing an analysis similar to that advanced by the US Securities and Exchange Commission. For crypto-assets that do not constitute financial products but remain subject to general Australian consumer protection laws, the Australian Competition and Consumer Commission (ACCC) has delegated powers to ASIC, acting in coordination with the ACCC, to respond to potentially misleading or deceptive conduct relating to crypto-assets which affect Australian consumers. This delegation presents a novel solution to the problem of overlapping jurisdictions over crypto-assets presented in many jurisdictions around the world.
IS 225 also notes that international regulators outside Australia have issued guidance on the application of their securities and financial services laws to ICOs and have defined the function of a range of crypto-assets (e.g., utility tokens and exchange tokens). These categorizations do not, according to ASIC, automatically translate to equivalent products in Australia. Instead, the definition of a financial product in Australia is often broader than that in other jurisdictions. As such, ASIC warns that crypto-assets such as utility tokens that may fall outside the regulatory perimeter in another jurisdiction may often be covered under ASIC’s broader definition.