June 3, 2019
A report reveals that the Australian Securities & Investment Commission is focusing on businesses who carry out ICOs and crypto-assets. The reason for the publication is to inform them about the legal obligations which they must meet to operate legally. We learned that the commission had updated it “Information Sheet 225” ICOs & crypto-assets (INFO 225). The basis for this update was the experience of ASIC with crypto-assets and initial coin offerings.
From what we gathered, the experience shows that crypto-assets and ICOs will often be or involve financial instruments. These financial products are the ones under the regulations of the Corporations Act.
The commissioner of the Australian Security & Investment Commission, John Price, also made some statements about the industry. According to Price, every business engaging in crypto-assets or any services that relate to crypto-assets must cover their bases. He advised them to undertake necessary inquiries to be sure that they are not operating illegally. They must check if they satisfy the requirements of the Australian Laws governing such activities.
John also pointed out that every financial product is under the Australian Consumer Law. It doesn’t matter whether it raise funds or not. Once the commission suspects any deceptive or misleading conduct, the product will be accountable.
Other areas of application are where crypto-assets or ICOs reaches the Australian market from offshore. Even if the promotions were in other countries and consumers also get them from outside Australia, the laws apply. Price, therefore, advise issuers of ICOs and Crypto-assets not to think that the laws don't apply in these scenarios.
From what we also gathered, everybody dealing in any aspect of ICOs or crypto-assets has to answer to the Consumer laws. For instance, people who issue crypto-assets, which falls under financial products will obey the Australia Consumer laws. Also, they must hold an AFS license.
Also, crypto-asset intermediaries are to operate under the laws as well. Anybody who deals, advice or provides such services for people who patronize crypto-assets must obey relevant laws. They also need the Australian financial services license.
The next people are those who mine and process transactions. They must bear in mind that the Australian laws apply to them in some cases. If their activities facilitate the clearing & settlement process for those tokens under financial product, the laws apply.
Trading and exchange platforms for crypto-assets are not left out either. If the platform deals on any of the crypto-assets under financial products, the laws apply. According to the commissioner, the operators must hold a market license to enable them to operate in Australia. They may also need to get a clearing and settlement license depending on their CS processes.
ASIC also mentioned that dealers who provide merchant and payment services for crypto-assets need to hold a license. Also, they will need to abide by some Australian laws guiding their operations.
Finally, custody service and wallet service providers must get the appropriate depository authorizations. That is if the tokens they store are under financial products.
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