Australian Regulator Warns Retail Investors against "Misleading" Cryptocurrency ICOs

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"We have been expecting ASIC to make bolder statements about the trend and look forward to seeing a more formal pathway for startups and small businesses to make use of regulated token offerings". It is similar to crowdfunding, except that the company issues a cryptocurrency and sells the tokens to investors to raise money.

In five other separate matters since April 2018, ASIC said it successfully acted to prevent ICOs raising capital without the appropriate investor protections. However, the ASIC has listed three main problems with the ICOs, the utilisations or statements that are "misleading or deceptive" for the goal of selling and marketing, conducting operations under an "illegal unregistered managed investment scheme", and not procuring a domestic financial services license.

The Commission has stopped outright several ICOs in Australia, and whilst initial coin offerings are not outright banned in Australia, there are growing hoops that they need to jump through before they get the greenlight.

ASIC's actions and statements are consistent with its Information Sheet 225 updated in May this year which encourages potential ICO issuers to consider if the nature of their ICO resembles a financial product.

ASIC published guidance on the legal responsibilities of Australians when it comes to conducting, or investing in, ICOs in September.

"ICOs are highly speculative investments, are mostly unregulated, and the chance of losing your investment is high".

ASIC Moneysmart page - Investor warnings on Initial Coin Offerings (ICOs) and cryptocurrencies.

Such problematic offers involve significant risks for investors, the regulator said.

ASIC's corporate plan from a month earlier notes that the crypto-asset sector was small but growing fast, "resulting in increased regulatory monitoring".

The UK government's Treasury Committee this week released a report calling the cryptocurrency market a "Wild West situation".

The Australian Securities and Investments Commission has intervened against at least seven cryptocurrency-related ventures since April.

Both Houses have passed legislation extending anti-money laundering and counter-terrorism financing regulation to digital currency exchanges.

There have also been security issues, with crypto exchanges hacked regularly around the world.

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