Australia toughens stance against misleading ICOs

Australia toughens stance against misleading ICOs
Photo: David McBeem Pexels

The rapid, perhaps unprecedented rise of cryptocurrencies and financial blockchain innovations continue to be a divisive subject for policy makers in the financial sectors of countries all over the world. Central banks and financial regulators are scrambling to adapt to the new realities this decentralized and sophisticated new interpretation of currency as a medium of exchange.

Many of the governments and institutions taking a dim view of and placing restrictions on cryptocurrencies and ICOs (Initial Coin Offerings) do so with the stated intention of protecting the general population, although many see an ulterior motive in such policies.

The Australian Securities and Investments Commission (ASIC) is the most recent authoritative body to try and come to grips the new technology and its unfolding realities. It has stated that it will be taking steps to curtail and stamp out the sometimes misleading or deceptive methods a number of ICOs use to market their tokens. This is, as they claim, in order to protect the Australian investor’s best interest in this new field of investment.

The mandate of putting these protective measures in place was placed upon the ASIC by the ACCC (Australian Competition and Consumer Commission) in April of this year. Their stated intention is to bring to bear the laws in place under the Australian Consumer Law in conjunction with with the ASIC Act to bring about court action against any ICOs caught offending these legislations and taking advantage of unwary consumers.

Australian map
Photo: Catarina Sousa, Pexels

As per their mandate, the agency is empowered by the ASCC to instigate court proceedings against those found to be using deceptive or misleading tactics in their ICO selling and marketing, even in cases where the ICOs do not explicitly involve financial products.

In a statement he made, John Price, the ASIC Commissioner, broadly put it in these terms: Should an entity or individual be acting on behalf of somebody, either selling them something or taking certain actions with their resources, then the law places certain responsibilities upon you. The structure of you ICO is immaterial here, as the bottom line of the matter is that misleading and deceptive statements cannot be allowed to brought into play. Breaches of trust will not be tolerated. He went on to emphasize that the Australian government and related regulatory bodies would maintain this line of reason going forward as this new sector continues to grow.

The progress so far

The ASIC hit the ground running, and is already in the process of analyzing each and every ICO that has been placed on the Australian market. The core elements they are particularly concerned with are the fundamental structural concerns of the token offerings, the status and credibility of the entities or individuals backing these ICOs, as well as the veracity and comprehensiveness of the whitepapers detailing the ICOs.

The whitepapers in particular are a focal point in these analyses, as these documents are the chief source of information potential investors are presented with as they consider placing their faith and money with an ICO, and thus are most liable to mislead the unsophisticated. Should any ICO be found to be in breach of any fair play rules, then they would find themselves open to penalization as determined under Australian law.

As of this time, the agency has already identified ICOs of interest and has communicated with their presenters in cases where they believe investors were misled or deceived at the time of the ICO issuance.

The state of cryptocurrency markets in Australia

Even though the cryptocurrency industry in Australia is a small one relative to countries such as the USA and various European and Asian markets, the Australian government has shown its willingness to take unusually robust steps to regulate the industry. The Australian Transaction Reports and Analysis Center (AUSTRAC) last month announced the imposition of new regulations on the sector, putting in place rules that would make it mandatory for cryptocurrency exchanges to hold operating licenses issued by them in order to be on the right side of the law.

The recent toughening of the laws comes in the wake of millions being raised by companies from the Australian public through token offerings in the few busy years the industry has been in operation there.