ASIC increases ICO scrutiny

The Australian Securities and Investments Commission (ASIC) is focusing its compliance activity on misleading or deceptive conduct in the marketing and selling of digital or virtual tokens via initial coin offerings (ICO).

These offers can involve significant risks for investors that are often not disclosed or well understood, the corporate regulator said.

Misleading or deceptive conduct is prohibited under the Australian Consumer Law and the ASIC Act.

ASIC is issuing inquiries to ICO issuers and their advisers where it identifies conduct or statements that may be misleading or deceptive.

“This is in addition to our inquiries where we identify potentially unlicensed conduct,” the regulator said.

“As a result of our inquiries, some issuer have halted their ICO or have indicated the ICO structure will be modified.”

On 19 April, ASIC received delegated powers from the Australian Competition and Consumer Commission (ACCC) to take action under Australian consumer law relating to crypto assets.

The move enables ASIC to take action against misleading or deceptive conduct in marketing or selling of ICOs, even if the ICO does not involve a financial product.

“If you are acting with someone else’s money or selling something to someone, you have obligations,” ASIC commissioner John Price said.

“Regardless of the structure of the ICO, there is one law that will always apply: you cannot make misleading or deceptive statements about the product.

“This is going to be a key focus for us as this sector develops.”

ASIC recently updated its “Information Sheet 225: Initial coin offerings and cryptocurrency”.

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