21 September, AtoZ Markets – The Australian Securities and Investments Commission (ASIC), has issued a warning on “misleading” Initial Coin Offerings (ICOs) and crypto-asset funds targeting retail investors.
The document the Australian financial watchdog published on their website on September 20, advised that ASIC has stopped five different ICOs from raising capital since April 2018.
The financial observer attributed their decision to the lack of appropriate investor protection measures on part of the fundraisers referred to.
“In September, one ICO was ordered to shut down permanently due to safety concerns”, according to the paper.
ASIC- which is taking a tougher stance to stand to fraud, stresses that these offerings ought to be restructured to meet the current legal standards.
The ASIC paper described ICOs as speculative, high-risk investments and largely experimental, explaining that some projects may take years before they become commercially viable, if at all. The document pointed out as well to that a large number of ICOs fail or do not increase in value.
The Points Should Be Met
The document also summarised the main issues that are currently prevalent on the ICO market, one of which is “misleading or deceptive statements in sales and marketing materials, and unregistered investment schemes that do not hold Australian financial services licence.”, as per the document.
ASIC recommended Australian citizens to refer to MoneySmart – an ASIC affiliate website – to get more acquainted on various financial matters before investing in ICOs.
In his turn, ASIC Commissioner John Price explained the main concerns with regard to ICOs the agency considers, saying: “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 that the disclosure of your offer is complete and accurate.”.
ASIC had previously warned that most ICOs are unregulated, and while there are genuine businesses using this structure, many have turned out to be scams.
ASIC commissioner Price confirmed that the ICO space will be “a key focus” area for the regulator going forward, stressing that the regulator will keep an “open mind” to new financial innovations, but not at the expense of “basic consumer protection” policies.