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    ASIC Updates Guidance on Initial Coin Offerings and Crypto-Assets

    May 30, 2019

    The Australian Securities and Investments Commission (ASIC) updated guidance (Information Sheet 225, also INFO 225) on initial coin offerings (ICOs) and crypto-assets. INFO 225 provides information on how the Corporations Act 2001 and the ASIC Act 2001 may apply to businesses that are considering raising funds through an ICO and to businesses involved with crypto-assets.

  • The information to be provided by a third party seeking authorization to assess the compliance of securitizations with the STS criteria provided for in Securitization Regulation should enable a competent authority to evaluate whether and, to what extent, the applicant meets the conditions of Article 28(1) of the Securitization Regulation. An authorized third party will be able to provide STS assessment services across EU. The application for authorization should, therefore, comprehensively identify that third party, any group to which this third party belongs, and the scope of its activities. With regard to the STS assessment services to be provided, the application should include the envisaged scope of the services to be provided as well as their geographical scope, particularly the following:

    • To facilitate effective use of the authorization resources of a competent authority, each application for authorization should include a table clearly identifying each submitted document and its relevance to the conditions that must be met for authorization.
    • To enable the competent authority to assess whether the fees charged by the third party are non-discriminatory and are sufficient and appropriate to cover the costs for the provision of the STS assessment services, as required by Article 28(1)(a) of Securitization Regulation, the third party should provide comprehensive information on pricing policies, pricing criteria, fee structures, and fee schedules.
    • To enable the competent authority to assess whether the third party is able to ensure the integrity and independence of the STS assessment process, that third party should provide information on the structure of those internal controls. Furthermore, the third party should provide comprehensive information on the composition of the management body and on the qualifications and repute of each of its members.
    • To enable the competent authority to assess whether the third party has sufficient operational safeguards and internal processes to assess STS compliance, the third party should provide information on its procedures relating to the required qualification of its staff. The third party should also demonstrate that its STS assessment methodology is sensitive to the type of securitization and that specifies separate procedures and safeguards for asset-backed commercial paper (ABCP) transactions/programs and non-ABCP securitizations.

    The use of outsourcing arrangements and a reliance on the use of external experts can raise concerns about the robustness of operational safeguards and internal processes. The application should, therefore, contain specific information about the nature and scope of any such outsourcing arrangements or use of external experts as well as the third party's governance over those arrangements. Regulation (EU) 2019/885 is based on the draft regulatory technical standards submitted by ESMA to EC.

     

    Related Links

    Effective Date: June 18, 2019

    Press Release
  • Proposed Rule 1
  • Proposed Rule 2
  • Proposed Rule 3
  • Presentation on Regulatory Framework (PDF)
  • Presentation on Resolution Plan Rules (PDF)
  • ASIC released new information to help businesses involved with ICOs and crypto-assets to consider their legal obligations and satisfy themselves they are operating lawfully. INFO 225 covers crypto-assets such as cryptocurrency, tokens, or stable coins and it:

    • Provides a non-exhaustive list of items to consider when offering an ICO
    • Discusses when laws prohibiting misleading or deceptive conduct, or the Corporations Act, would apply to an ICO or a crypto-asset
    • Types of ICO offers made available to consumers in Australia and whether the Corporations Act might apply to them
    • Provides guidance about platforms that enable trading of crypto-assets
    • Provides details regarding financial products that reference crypto-assets

    In January 2019, Treasury noted in its issues paper on ICOs that many ICOs have turned out to be scams. Businesses seeking to operate lawfully and legitimately need to distinguish themselves from possible scams and carefully consider the information in INFO 225.

     

    Keywords: Asia Pacific, Australia, Securities, INFO 225, Initial Coin Offerings, Crypto-Assets, ASIC

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