ASIC takes aim at ICOs, but Australia is generally open to crypto investments

Initial coin offerings (ICOs) have become the lifeblood of alternative cryptocurrencies, better known by the community as ‘altcoins’.


Summary:

  • ASIC clamps down on ICO investments in Australia.
  • Australian public increasingly interested in cryptocurrencies, regardless.
  • Queensland leads in recent adoption efforts.

Most new cryptocurrency teams require financing to achieve the goals outlined in their white papers. They seek to raise this financing by selling a quantity of the cryptocurrency in the form of tokens or coins to investors, in exchange for legal tender or other cryptocurrencies such as Bitcoin or Ethereum.

However, the global growth of misleading and deceptive ICOs, which are often tied with crypto “teams” exiting with money raised from investors, has spurred the Australian Securities & Investments Commission (ASIC) to act.

In five other separate matters since Apr-2018, ASIC successfully acted to prevent ICOs from raising capital without the appropriate investor protections. These ICOs have been put on hold, and some will be restructured to comply with the applicable legal requirements. Aside from the misleading sales and marketing materials used by these apparent cryptocurrency start-ups, ASIC also said consistent problems lie in their operation of an illegal unregistered managed investment scheme and not holding an Australian financial services licence.

ASIC Commissioner John Price said: “If you raise money from the public, you have important legal obligations. It is the legal substance of your offer – not what it is called – that matters. You should not simply assume that using an ICO structure allows you to ignore key protections there for the investing public and you should always ensure disclosure about your offer is complete and accurate”.

Although ASIC’s current interest is in managing the ability to invest in ICOs, there is a range of cryptocurrency activity simply out of ASIC’s scope, and that will remain unregulated – or regulated only in part – at least for the near future. The cryptocurrency market remains in its infancy, and so does the hold of regulators on those involved.

Although ASIC is clamping down, Australia remains quite open to cryptocurrencies

The number of Australian nationals who own cryptocurrency has tripled since the beginning of 2018, according to a sample survey carried out by the Sydney-based crypto brokerage firm HiveEx.

50% of HiveEx’s survey sample cited their reason as holding crypto as an investment, while 34% hold tokens through fear of missing out. The other 26% are using cryptocurrency to save for retirement.

More notable is that 80% of respondents would be open to using crypto tokens for daily purchases – on the prerequisite that it was as easy to conduct transactions in Australian Dollars.

The state of Queensland seems to be a recent standout in supporting the adoption of crypto in Australia, with the state awarding a grant to the local start-up TravelbyBit to deploy its point of sale system to over 200 merchants across Australia, of which 60% are located in Queensland.

TravelByBit’s platform has also been deployed at Brisbane Airport, the capital city airport of Queensland.  Passengers are already able to use TravelbyBit’s cryptocurrency system for payments at selected airport retail and F&B outlets, with transactions involving the likes of Bitcoin, Dash and Ethereum.

As in other countries and regions, the road to adoption for cryptocurrency in Australia is largely dependent on two things – implementation of acceptable regulation and a resulting market that is more predictable. Prices of tokens have continued to fall: the total crypto market capitalisation in Jan-2018 reaching USD815 billion, but now declining to be only USD212 billion.  Cryptocurrency exchanges and brokerage firms in Australia must continue to take a fundamental role in building the crypto ecosystem and aim at establishing legality and authenticity.