Australia ICO new guidelines introduction

According to the author: With the continuous renovation of ICO, the breadth and depth of supervision of relevant countries, the policies and measures adopted are escalating, and Australia is one of them.

As far as ICO is concerned, even in countries and regions where ICO is not banned, innovation (inclusion with fraud) and regulatory wrestling and confrontation have never stopped. With the continuous renovation of ICO, the breadth and depth of supervision of relevant countries, the policies and measures adopted are escalating.

In June, the US Securities and Exchange Commission (SEC) and the US instant messaging software company Kik Interactive Inc. had a fierce battle for more than two years. The SEC filed a lawsuit against the company, accusing it of selling to American investors in ICO. The currency was not registered for the issuance and sale of tokens in accordance with the requirements of the US Securities Act.

At the end of May, the Hong Kong Securities and Futures Commission launched a new round of investigations against relevant ICO issuers due to concerns about non-compliance such as fraud in ICO.

On May 30, the Australian Securities and Investments Commission (ASIC) updated its first release on September 29, 2017 and the first time on May 3, the following year, based on the status and regulatory experience of the country's ICO. Updated ICO Regulatory Guidance Document "Information Sheet 225" [1] .

The market has given extensive attention to the regulatory dynamics of the US and Hong Kong ICO. This article is intended to highlight Australia's newly updated ICO Regulatory Guidance Document and incorporate Australia's key provisions applicable to the ICO (including the Australia Companies Act, the Australian Securities and Investments Commission Act, The Australian Consumer Law, Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2017, etc., as the most important country in the Southern Hemisphere One of Australia's latest regulatory attitudes and regulatory trends for ICO is for those interested in learning about ICO's regulatory policies in Australia.

First, update several points in the information table

1. Reaffirm and further clarify the types and regulatory requirements of cryptographic assets issued in ICO

The ASIC indicates in the updated information table that the encrypted assets include cryptocurrency, tokens, stable coins, and the like.

The updated information sheet basically follows the characterization and classification of the cryptographic assets issued in the ICO when the table was originally released – either financial products or non-financial products; financial products are divided into investment management plans (Managed) Investment Scheme/MIS), securities, derivatives and non-cash payment (NCP), the main judgement of the distinction is the specific rights and characteristics attached to the relevant cryptographic assets (see the specific identification elements and main regulatory requirements). The following table).

Type of financial product

 

Identify the elements that make up a particular financial product

 

Main regulation MIS (A) the investor's investment in money or assets to purchase the relevant investment management plan;

(B) the funds raised are concentrated or used in a joint venture to generate property income;

(C) Investors are not involved in managing day-to-day operations but may have voting rights or similar rights

Ø If a retail MIS is issued, it can only be issued to retail investors, usually (a) registering the management investment plan with ASIC;

(b) has a charter and compliance program;

(c) obtaining an Australian Financial Services License (AFS License);

(d) Prepare and issue a Product Disclosure Statement (PDS);

Ø If wholesale MIS is issued, it can only be issued to wholesale investors and FAS License is required.

Securities

Ø Share – The rights attached to the issued token are similar to those attached to the company's shares (such as ownership of the company, voting rights, participation in profit distribution, etc.);

Ø option – the issued token is accompanied by a purchase option (ie the right to purchase shares of the company in the future); or

Ø Debenture – The rights to issue tokens with similar bonds

It is usually necessary to prepare a prospectus to fulfill relevant information disclosure obligations. Derivatives

The pricing of the issued token is determined based on other factors (such as the price of other financial products, the underlying market index or the price of the asset), and is required to be paid in accordance with the rights or obligations attached to the token at a certain time or event.

If the investor is a retail investor, the issuer needs to prepare a PDS.

NCP (A) the issued token can be paid to multiple payees as a form of value; or

(B) Payment can be made in tokens first, but will be converted into legal currency during the payment process.

The issuer needs to obtain an AFS License.

ASIC further pointed out in the information sheet that the classification of tokens in other countries does not necessarily correspond to and applies to the classification of Australia. Australia's definition of financial products is broader than other countries. For example, some tokens may be regarded as practical tokens in some countries and are not regulated, but may be regulated as financial products in Australia. .

2. Identify the top issues to consider in the ICO

The ASIC reminds the issuer in the updated information sheet to consider three issues before proceeding with the ICO:

(1) Whether the encrypted assets issued in the ICO are financial products or involve financial products;

(2) If the issuer believes that it does not constitute a financial product, is there sufficient reason to support its conclusion;

(3) Whether the issuer can continue to comply in all aspects in the future.

 

3. Clarify the applicable subjects of relevant regulations

According to the updated information sheet and related regulations, in Australia, almost all participants in the cryptocurrency industry are subject to the laws of the country, and may require different types of licenses depending on the type of business, such as AFS License, Australian market. (Australian Market License/AM License), Clearing and Clearing facility license (CS facility license), etc. (see the table below for details).

Market entity Main product or service provided Required main license or regulatory requirements
Encrypted asset issuer

If the issued encrypted asset belongs to a financial product

AFS License is required depending on the situation. Encrypted asset intermediaries

Advising, trading or other intermediary services for encrypted assets belonging to financial products

AFS License Miners and transaction processors

Such as the settlement and settlement of tokens belonging to financial products Clearing and settlement related regulations apply

Exchange and trading platform Transactions processed by the platform involve encrypted assets belonging to financial products AM License (except for exemptions)

CS facility license (depends on the clearing and processing methods may need to be obtained)

If the exchange of legal currency and digital currency is supported, the exchange or trading platform operator must register with the Australian Transaction Reporting and Analysis Center (AUSTRAC).

Payment and business service provider

Such as payment services involving NCP AFS License Wallet provider and hosting provider

If the token stored in the business is a financial product Need to obtain proper deposit authorization

4. Emphasize that ICO must not be misleading or fraudulent

ASIC re-emphasizes in the updated information sheet that no matter whether the token issued by ICO is a financial product or a non-financial product, there must be no misleading or fraudulent conduct.

In view of the different types of tokens issued in ICO, the applicable regulations are also different: in the case that the token issued by ICO is a financial product, the issuer should abide by the Company Law and the “Regulatory Guidelines” issued on November 15, 2012. 234 Regulations of the Regulatory Guide 234 Advertising Financial Products and Services (Including Credit): Good Practice Guidance; and the case where the token issued by the ICO is a non-financial product The issuer shall comply with the provisions of the Australian Consumer Law.

If the ICO issuer violates the above provisions, ASIC will have the right to cooperate with the Australian Fair Competition Consumer Council (ACCC) to hold them accountable.

Second, summary

1. Stabilizing coins is an encrypted asset

The updated information table lists the stable currency in the range of encrypted assets in the manner listed, indicating that the stable currency is also an encrypted asset, which may exist in parallel with the cryptocurrency and token, rather than one of the cryptocurrency or token. And means that activities related to the stable currency are also subject to the supervision of the Australian government.

2. Australia 's classification of tokens issued in ICO has its own uniqueness

Australia's classification of tokens issued in ICO is self-contained and not identical to other countries, such as compared to the United States:

(1) Australia divides tokens into two categories: financial products and non-financial products. The United States is divided into two types: utility tokens and securities tokens. The connotation and extension of the tokens that make up financial products in Australia are not the same as the connotations and extensions of securities in the United States. The tokens that make up non-financial products in Australia are not the same as those in the United States.

(2) Australia has certain similarities between the relevant elements in the definition of MIS and the United States' partial judgment criteria for the investment contract (which is a securities under US law) (such as the use of capital investment, investment in common cause to obtain Revenue), but the two are not equivalent. Forming MIS in Australia does not mean forming an investment contract in the United States, and vice versa.

3. The same tokens issued in the ICO may apply to different regulatory systems.

Due to the inconsistent classification of tokens by countries, the same tokens may have different regulatory systems applicable in different countries. For example, a token issued in the ICO may be a functional securities in other countries and is not regulated. In Australia, it may constitute a financial product and will be strictly regulated.

4. Australia 's regulatory guidelines for ICO also apply to STO

In Australia, the tokens issued in STO are mainly MIS or company shares. The information sheet also provides guidance for STO issuers to fulfill the obligations related to the issuance of such types of tokens. For details, please refer to the table in the first part of this document. summary.

(This article is the first to send Babbitt information, please indicate the source)

Author: Zhang Ling, Han a law firm partner.

Disclaimer: This article only represents the author's personal opinion and does not represent the opinions of the organization. The contents of this article do not constitute legal advice and investment advice. To reprint or cite any of the content in this article, please include the author's name.

[1] https://asic.gov.au/regulatory-resources/digital-transformation/initial-coin-offerings-and-crypto-assets/