ASIC Updates Its Guidance on Treatment of ICO's
On 1 May 2018, the Australian Securities and Investments Commission (ASIC) released its revised Information Sheet 225 which provides an updated guidance on initial coin offerings (ICOs). The updated report expands its scope to include guidance dealing with other crypto-currency and digital token (Crypto-Asset) businesses.
In particular, this updated report underlines ASIC’s position that even if an ICO or Crypto-Asset is not classified as a financial product or an offer of a financial product, businesses are still subject to the general law and Australian Consumer Law. As such, ASIC recommends that businesses seeking to undertake an ICO to ensure that:
- they have carefully considered the structure of the ICO or Crypto-Asset and the information they have provided to consumers so as not to engage in any misleading or deceptive conduct;
- professional advice and disclosures are kept up-to-date where the design of the ICO or crypto-asset changes over the course of the product development; and
- they are aware of their general obligations under the Corporations Act 2001 (Cth) such as the officers’ best interest and proper purpose duties.
ASIC warns businesses seeking to undertake an ICO or issue a Crypto-Asset that they have received a delegation from the Australian Competition and Consumer Commission (ACCC) and will take action against any entities where there is the potential to mislead or deceive.
Finally, the updated report includes ASIC’s guidance for businesses looking at issuing financial products that would invest in (or gain exposure to) Crypto-Assets. ASIC notes that these businesses need to carefully consider what financial services they will be providing and whether they need a new licence or authorisation to provide the proposed financial product.