Regulator Wary of ICO Bubble

Regulator Wary of ICO Bubble”

The Australian Securities and Investments Commission (ASIC) has published an "information sheet" (INFO 225) that discloses how companies that are considering token offerings (also referred to as ICOs) may be affected by Australian law, specifically the Corporations Act 2001.

"If the tokens are not financial products, then investors will need to closely consider the ICO documentation as the investor protection regime under the Corporations Act will not apply".

ASIC said that individuals should make certain issuers are registered with their professional register prior to investing in any ICO.

Rather than providing an all-encompassing definition, ASIC's view is that the legal status of ICOs is contingent upon each ICOs structure and operation as well as the rights conferred as a result of the offering.

ASIC wants to ensure innovative firms understand the regulatory framework they may be operating under and ensure they meet any obligations they may have when raising funds in Australia.

"ICOs are highly speculative investments, are mostly unregulated, and the chance of losing your investment is high". These rights are generally outlined in the "white paper" that accompanies the ICO.

As a final note, ASIC reminds potential issuers about their compliance obligations and Australia's stringent laws concerning misleading and deceptive conduct in trade and commerce, in connection with financial services and in relation to financial products.

"Consumers should understand the risks involved, including the potential for these products to be scams, before investing". The same month, Veritaseum said it was hacked and a similar attack reportedly followed against Enigma last month.

The document also clarified the different categories of ICOs, such as when an ICO was a managed investment scheme, an offer of shares, an offer of a derivative, or an offer of a non-cash payment facility.

In order to ensure that the public are not misled, ASIC makes clear that crowdfunding using an ICO is not the same as crowd-sourced funding (CSF), which will be regulated under the Corporations Act from the 29 September.

ASIC, which serves as Australia's corporate, markets and financial services regulator, is tasked with the job of ensuring that the country's financial markets are fair and transparent for consumer trust and confidence.

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