STO Registration Procedures in Australia

What are the main regulations that exist in Australia if you’d like to launch an STO/ICO?

Taxation legislation

• Tax treatment of crypto-currencies in Australia (specifically bitcoin’): the Australian Taxation Office’s guidance on the subject and how tokens are treated under our taxation legislation.

Corporations Act 2001 (Cth) — This contains the Australian securities laws

• These laws prohibit, among other things, misleading or deceptive conduct in relation to tokens that are financial products.
• INFO 225 — guidance published by ASIC on the applicability of the Corporations Act 2001 (Cth) to ICOs and businesses dealing in cryptocurrencies/digital tokens.

The Australian Consumer Law (schedule 2 to the Competition and Consumer Act 2010 (Cth))

• These laws prohibit misleading or deceptive conduct in relation to tokens that are not financial products.

Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth)

• This legislation establishes Australia’s AMLCTF regime.
• If the token (defined as a “digital currency” under the law) is convertible for any fiat currency, the issuer has a geographic link with Australia under the legislation and, in course of carrying on a digital currency exchange business, exchanges the tokens for fiat currency or vice versa, the issuer is regulated by these laws.
• Nonetheless, the Australian regulator and Financial Intelligence Unit, the Australian Transaction Reports and Analysis Centre (AUSTRAC) has said that it does not consider ICO issuers to be regulated under the law as digital currency exchange providers if no exchange transaction involving fiat currency takes place.

What are the main liabilities of an STO team to the ST holders and who is in control over the fulfillment of this obligation?

To my knowledge:

• If the ST is a financial product, they have a range of potential liability for breaches of the Corporations Act 2001 (Cth) and the ASIC Act 2001 (Cth), such as the prohibition of misleading or deceptive conduct in relation to the token. The main regulator here is ASIC.
• If the ST is not a financial product, they have a range of potential liability for breaches of the Australian Consumer Law, which prohibits misleading or deceptive conduct in relation to the token. The main regulator here is ASIC.
• If the STO team are directors/officers of a company involved in the issuance of the STO and they cause the company to breach the above two laws or any other law (such as the AMLCTF regime if the company is regulated under it), they will be in (potentially criminal) breach of their duties to act in the best interests of said company, with due care and diligence and discharge their duties for a proper purpose. Also, if they’re directors/officers/employees, they must not misuse their position or improperly use information obtained in the course of their being a director/officer/employee of a corporation to gain an advantage for anyone or cause detriment to the company.

What are the advertising limitations for the STO marketing campaign in comparison with one for an ICO?

To my knowledge, they are very similar for both, especially the prohibition against misleading or deceptive conduct in relation to the relevant token and whether or not it is a financial product.

What is legal status of cryptocurrencies in Australia?

They are not legal tender in Australia, but they are of themselves not illegal.

Specific types of conduct in relation to them is regulated by different regulatory frameworks, namely those above.

Do you have anything further to say about the legal nuances of cryptocurrency/token regulation?

Last year, I wrote a thesis on how conventional AML regimes can be applied to regulate cryptocurrency ecosystems. My research taught me the following:

• Regulators (particularly those involved in AMLCTF regulation) must take great care to understand the actual mechanics of cryptocurrencies and their ecosystems, particularly the technological mechanics. This must include the regulators working with the cryptocurrency sector in a constructive fashion. In turn, this helps the regulators understand what styles of regulation and existing regulatory frameworks are engaged by cryptocurrencies, and thus whether any substantive law reform is actually needed.
• The regulators must be highly attuned to the risks to consumer welfare and national security that are posed by these virtual assets. The regulators must not be caught up in the hype surrounding cryptocurrencies when evaluating them.
• The regulators must appreciate the extraordinary good which the distributed ledger technology underlying cryptocurrencies can deliver for our world. Thus, regulators must ensure that the regulation of cryptocurrency ecosystems is reasonably targeted and not unnecessarily burdensome for regulated entities. This is to prevent the (undue) stifling of the incredible innovation that is embodied by distributed ledger technology.