Initial coin offering (ICO) is a method through which a company raises capital by issuing tokens, that will be sold to various types of investors and who will obtain, in return, specific benefits for the purchase.
ICO in Australia is a legal way to raise capital, and this has to be done in accordance with the Australian law. For those who want to open a company in Australia as a blockchain business, specific laws have to be observed.
Advice concerning ICOs, blockchain and cryptocurrency laws can be obtained from our team of consultants in company formation in Australia, so please address to our specialists for in-depth information.
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What are the current rules for ICO in Australia?
The laws which regulate the manner in which ICOs have to be concluded in Australia are prescribed by the Australian Securities& Investments Commission (ASIC).
The institution implements the rules of the Australian Securities& Investments Commission Act 2001 and the Corporations Act 2001, as well as of the INFO 225 (the Australian Consumer Law).
Local and foreign investors who want to set up a company in Australia involved in the issuance of cryptocurrency and raising capital through ICO must verify the provisions of the following rules in order to ensure a legal activity:
- those who may need to apply for a license must observe the provisions of Regulatory Guide 1 AFS Licensing Kit: Part 1 and the Regulatory Guide 36;
- where mining activities appear, the rules of the Regulatory Guide 211 will apply;
- where cryptocurrencies that are financial products are exchanged, the Regulatory Guide 172 applies;
- for crypto asset payments, the rules of the Regulatory Guide 185 must be followed;
- advertising of financial products must be done in accordance with the rules of the Regulatory Guide 234.
How is ICO in Australia issued?
In order for a blockchain business to issue ICOs, certain steps have to be concluded in a certain order. You can find out below the basic procedures that are followed:
- the company that wants to raise capital through ICOs will release its white paper, through which the project is presented to the public;
- then, the tokens are advertised on different platforms, including the company’s website;
- the sale of the tokens is initiated by those who want to purchase;
- when a purchase is concluded, the buyer will receive the token in a digital wallet;
- then, the company selling the token will receive the amount at which the token is sold.
If you need legal advice regarding ICOs in other countries, such as Vietnam or UK, we can put you in touch with our local partner lawyers.
What is the white paper/prospectus in Australia?
The white paper or the prospectus are documents that provide legal and accurate information regarding the company initiating the ICO in Australia and the products that are sold.
These documents are legally binding and they have to contain a set of provisions, that can be presented by our team of consultants in company incorporation in Australia.
There are 2 basic situations regarding these documents: 1) the white paper is the basic document that must be prepared for ICO in Australia; 2) the prospectus must be prepared when the ICOs are considered securities.
The main provisions of a prospectus are given by the Regulatory Guide 228 Prospectuses: Effective Disclosure for Retail Investors (RG 228).
The prospectus has to be created as a disclosure document, as per the rules of the Chapter 6D – Corporation Act. It must also be written in a concise manner (s715A) and include the information based on the general disclosure test (s710).
If you need additional information on ICO in Australia and the rules applicable to ICO documents, please refer to our team. Our specialists in company formation in Australia can help companies in preparing all the documentation required for raising capital.
When you will open a company in Australia that deals with ICO operations, you will need to register with ASIC and pay the required fees. Starting with 1 July 2022, the standard registration fee is of $538 for a legal entity registered with a share capital.
For a company that does not have a share capital, the registration fee is of $443. The current fees are regulated under the Corporations (Fees) Act 2001.
Please mind that the current fee system is adjusted to the Consumer Price Index (CPI) and this procedure is implemented by ASIC every year, on 1 July. So, for those who will set up a company in Australia in the 3rd or 4th quarter of the year it is recommended to verify if other fees are applied.
This can happen if the CPI will change. If not, the current fees will still be applicable and charged to local and foreign applicants.
You are invited to contact our specialists in the case in which you are interested in finding out the conditions required for the purchase of a shelf company in Australia.
It is important to know that this type of company is available for sale to both local and foreign investors and that the shelf company is incorporated under many legal entities, but in most cases, it is available for sale as an LLC.