Australian Securities & Investments Commission Releases ICO Guidance

The regulatory framework around conducting an ICO in Australia has just become clearer to startups, thanks to a guidance piece released by the Australian Securities & Investments Commission (ASIC). While transparent legal instructions are of huge benefit to startups looking for ICO funding, it does appear that the conditions themselves are much more unfavourable than those in other jurisdictions.

More specifically, crypto assets that fall under the definition of “financial products” are subject to pre-existing Australian laws, such as the requirement of holding an Australian financial services (AFS) licence. The institution has provided a helpful explanation, detailing which exact properties of a crypto asset to look for – namely the investor’s ability to acquire an interest in the scheme, pooling of contributions for financial or other benefit, and the lack of day-to-day control of the scheme.

Even mining is considered by the regulators. Once again, if a token is deemed to be a “financial product”, pre-existing Australian laws apply. The guidance piece reads:

“Where miners and transaction processors are part of the clearing and settlement (CS) process for tokens that are financial products Australian laws apply.”

In addition, there is a section on “Crypto-asset payment and merchant service providers“, who are also a subject of strict regulation. Even in cases when the company is registered and managed outside the country, consumer laws could still apply, meaning that the KYC procedure that has become standard in cryptocurrencies for the past two years is once again a requirement. Exchange service providers fall under the “non-cash payment facilities” category, which has its own string set of guidelines.

Australia is currently home to 108 ICO projects, as shown by ICOBench. The vast majority of those crowdsales are completed, which raises the question whether retroactive application of law is in order. There has been no indication of any specific actions against ICO projects taking place. But whatever happens to ICO startups that have already performed their token sales, chances are that many Australia-based projects might attempt to circumvent the regulatory burden by moving their business outside the country.