The Australian Securities & Investments Commission (ASIC) has said that initial coin offerings (ICOs) that target retail investors will be subject to more intense scrutiny, Reuters reported.
An ICO is a method for companies to raise capital from institutional investors and the public. It is similar to crowdfunding, except that the company issues a cryptocurrency and sells the tokens to investors to raise money.
ASIC said there have been recurring problems with ICOs making “misleading or deceptive” statements in sales and marketing material. Many companies conducting ICOs also do not hold the necessary Australian financial services licences.
In addition to promising greater regulatory scrutiny, ASIC has blocked five ICOs and is taking action against one that has already been completed.
“If you raise money from the public, you have important legal obligations,” said John Price, Commissioner of ASIC.
Part of the problem is that some ICOs operated unregistered and illegal investment schemes.
“ICOs are highly speculative investments that are mostly unregulated, and while there are genuine businesses using this structure many have turned out to be scams.”