Some Difficulties Australians Face In Investing In Cryptocurrency

Digital currencies like Ether present difficulties for lawmakers due to their uncertain treatment under existing regulatory regimes around the world because of their origin on the blockchain, in addition to practical concerns like cybersecurity. Coinware is a website offering education on cryptocurrency regulation in Australia. It is possible to use this website as a reference for information on cryptocurrency trading. Many aspects of cryptography can be difficult to grasp. As a company based in Australia, our goal is to make blockchain and cryptocurrency understandable to all Australians. To begin, this article examines some of the legal and regulatory issues surrounding cryptocurrency in Australia, as well as a recent phenomenon known as an Initial Coin Offering (ICO).

Cryptocurrencies and ICOs

Australia has had very little regulation of digital currency until recently. Distributed ledger technology (DLT) has forced regulators and companies to rewrite existing legislation to address new challenges posed by DLT. This has been a tough undertaking for both regulators and businesses. Cryptocurrency exchange regulation legislation drafted by both the Australian Securities and Investments Commission (ASIC) and the Australian Taxation Office (ATO) is a sign of things to come. Token sales and issues, or ICOs, often include the sale or issuance of blockchain-based tokens that provide their holders a set of rights related to a certain project.

ICOs have a wide range of styles and content. An investor’s right to participate in the project, the right to trade tokens for goods and services, or even the right to be reimbursed for a debt may all be granted by investing in tokens. The value of tokens provided in an ICO might be anything, depending on the project’s nature. Before raising money via an ICO, companies often release a “white paper” or another disclosure document to potential investors. To help enterprises and investors understand how to apply current laws, the paper may define the ICO’s objective, a market case for the items or project, or the practical usage of the token.

If you buy an ICO token, can you get a stake in a Managed Investment Program?

The entity in charge of an ICO might be running a managed investment program under the Corporations Act (MIS). According to ASIC’s guidelines, an ICO is likely to be considered an MIS if the value of the digital currencies obtained is changed by the pooling of money from contributors or the use of those funds under the arrangement.

Is it possible that tokens are derivatives?

Even though electronic contracting is often immediate, it is feasible, as highlighted in ASIC’s guidelines, that a token provided in an ICO may fall under the difficult definition of a derivative and be regarded as a financial instrument. Investors may be given the right, but not the responsibility, to purchase tokens at a predetermined price later on.

How else may the rules of the financial services industry be used?

In this case, if an ICO (or a token sold via it) became a financial instrument, any platform that allowed investors to purchase and sell may be considered a “financial market.” Financial market operators in Australia must be licensed unless an exception exists. A non-cash payment (NCP) facility is another kind of financial instrument. NCP facilities aren’t likely to accept ICO-issued coins as payment, but an ICO-issued coin might be the means through which a payment is made using an NCP facility.

International regulation of cryptocurrency and initial coin offerings (ICOs)

As in Australia, various countries’ methodologies and viewpoints on the disposition of tokens provided in an ICO have created uncertainty in other jurisdictions, including Canada, the US, Singapore, and China.  According to the Canada Securities Administrator (CSA), tokens or coins issued in Canada during an ICO might be considered securities in various cases. In the immediate aftermath of China’s recent ban on ICOs led by the People’s Bank of China, bitcoin’s price spike was temporarily halted.

Coins and ICOs offer new ways to conduct business, exchange value, and raise capital, but their rapid rise presents new regulatory issues. There is a risk that investors may not receive the legal protection they are entitled to if money is raised outside of established regulatory regimes. It is important to consider the form and substance of an ICO to determine how the tokens will be classified, as well as the legal obligations that may arise as a result.

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