Australia’s regulatory watchdog targets ICOs and crypto-funds

Australia’s financial watchdog is conducting a thorough investigation on initial coin offerings (ICOs) and other crypto funds that offer services to retail investors. The Australian Securities and Investments Commission (ASIC) has cited “continuous problems” and aims to verify the operations and eventually shut down several ICOs that maliciously extract funds from retail investors. ICOs operate freely in Australia, there is currently no law either banning them or restricting their conduct, but there remains ambiguity about their workings. However, the ASIC has listed three main problems with the ICOs, the utilisations or statements that are “misleading or deceptive” for the purpose of selling and marketing, conducting operations under an “illegal unregistered managed investment scheme”, and not procuring a domestic financial services license. The ASIC goes on to say that the above points, “involves significant risks for investors.” John Price, ASIC’s Commissioner said, ”If you raise money from the public, you have important legal obligations. It is the legal substance of your offer – not what it is called – that matters. You should not simply assume that using an ICO structure allows you to ignore key protections there for the investing public and you should always ensure disclosure about your offer is complete and accurate.” This is not the first time that Australian ICOs have had a run-in with the regulator body. In April 2018, the ASIC prevented ICOs from raising funds if they failed to comply with the necessary investor protection protocols. The ICOs, in this case, have been on an indefinite hold, following restructuring they will be subject to adhering to the legal requirements. The ASIC has issued several warnings to the Australian investors with reference to the “highly speculative investments” of the ICOs and have advised them to consult with their financial guide, Moneysmart. Moneysmart has a warning about ICOs in which it tells the investors to do their due diligence regarding the coins and the ICOs before pledging their money, adding, “you could lose a lot of money if you buy into an ICO without doing your research first.” “ICOs are speculative, high-risk investments. Many ICOs are for projects that are experimental, are at a very early stage of development or may not have even started yet. As a result, some projects may take years before they become commercially viable, if at all. A large number of ICOs fail or do not increase in value” added ASIC’s financial guide Moneysmart. In 2017, the ASIC configured guidelines on ICO’s raising of funds to once again remind them about their obligations prior to any token issuances. ASIC said at the time, “ASIC recognizes 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.” Back in April, the commissioner John Price said that ICO operates in a “key space” in the crypto-market and hence falls within the paradigm of the regulatory body. He further added that they will keep an “open mind” when it comes to innovations in the financial world, but “basic consumer protection” is something that they strive for and will be their foremost priority. See also: KuCoin sails to new market; helps Bitcoin Australia in global expansion See also: Australian blockchain start-ups attend trade mission in China