ASIC have released further insight into their stance on, and treatment of, initial coin offerings (“ICOs”) and crypto-assets.
As we have previously mentioned in earlier posts, ASIC’s Information Sheet 225 provides guidance on what obligations may apply to an ICO under the Corporations Act, including when an ICO may be considered to be:
· an interest in a managed investment scheme;
· a share in a company;
· a derivative; and
· a non-cash payment facility.
Misleading and deceptive conduct
ASIC have recently updated this Information Sheet to stress the prohibition under Australian law relating to misleading and deceptive conduct, and to provide some clarity on how ASIC will apply these laws in the ICO/crypto-asset space.
ASIC notes that the application of certain prohibitions against misleading and deceptive conduct may depend on whether or not the ICO/crypto-asset is a ‘financial product’ under the Corporations Act. However, it is important to be aware that even if the ICO/crypto-asset is not such a ‘financial product’ under the Corporations Act, the prohibitions against misleading and deceptive conduct under the Australian Consumer Law must still be complied with.
ASIC have provided some helpful examples to assist in understanding what kinds of conduct may be prohibited under these laws, such as:
· the use of social media to generate the appearance of a greater level of public interest in an ICO;
· undertaking or arranging for a group to engage in trading strategies to generate the appearance of a greater level of buying and selling activity for an ICO or a crypto-asset;
· failing to disclose adequate information about the ICO; or
· suggesting that the ICO is a regulated product or the regulator has approved the ICO if that is not the case.
Undertaking an ICO or other crypto-asset activities that fail to comply with these prohibitions may be a serious breach of Australian law, and ASIC have stressed that they intend to take action in coordination with the ACCC where they consider there is potential misleading and deceptive conduct.
Accordingly, it is crucial that you seek legal advice if you are considering an ICO, and then to work closely with your legal advisors throughout that process.
At Motus Legal, our close involvement with technology companies and our expertise in financial services and capital raisings have allowed us to provide valuable assistance on ICOs, and we are excited to be working with a number of our clients in relation to their ICO plans.
Get in touch with us so we can help you with your plans.
The team at Motus Legal