Australia’s financial regulator is cracking down on deceptive and misleading initial coin offerings (ICOs), citing “a serious breach of the Australian law.” As a result of the regulator’s inquiries, some issuers have halted their token sales or are modifying their structures.
Also read: Yahoo! Japan Confirms Entrance Into the Crypto Space
ASIC Takes Action Against ICOs
The Australian Securities and Investments Commission (ASIC) announced on Tuesday that it is taking action “on misleading or deceptive conduct in the marketing and selling of digital or virtual tokens via initial coin offerings (ICOs).”
ASIC is an independent Australian government body that acts as the country’s corporate regulator. Citing that “these offers can involve significant risks for investors that are often not disclosed or well understood,” the Commission wrote:
ASIC is issuing inquiries to ICO issuers and their advisers where we identify conduct or statements that may be misleading or deceptive. This is in addition to our inquiries where we identify potentially unlicensed conduct. As a result of our inquiries, some issuers have halted their ICOs or have indicated the ICO structure will be modified.
ASIC Has the Power
The Australian Competition and Consumer Commission (ACCC) delegated powers to ASIC on April 19 to take action under the Australian Consumer Law relating to crypto-assets. “The delegation from the ACCC 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,” ASIC described.
ASIC Commissioner John Price elaborated:
If you are acting with someone else’s money, or selling something to someone, you have obligations. 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.
Misleading or Deceptive Conduct
ASIC has also updated its information sheet on ICOs and cryptocurrency which defines “misleading or deceptive conduct.” The Commission notes that “it does not consider bitcoin to be a financial product,” so the prohibitions against misleading or deceptive conduct relating to bitcoin fall under the Australian Consumer Law and the ASIC Act.
The Commission gave four examples of what this conduct may entail. “The use of social media to generate the appearance of a greater level of public interest in an ICO” is the first on the list, followed by “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.” In addition, “failing to disclose adequate information about the ICO” and “suggesting that the ICO is a regulated product or the regulator has approved the ICO if that is not the case” are also prohibited.
The Commission emphasized:
It is a serious breach of the Australian law to undertake misleading or deceptive conduct.
What do you think of ASIC cracking down on misleading and deceptive ICOs? Let us know in the comments section below.
Images courtesy of Shutterstock, ACCC, and ASIC.
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