Treasury Consultation Paper on ICOs in Australia: The Technology, The Market, and The Regulation of ICOs

Abstract

The Australian Treasury has identified a number of challenges in FinTech, especially around Initial Coin Offerings (ICOs). In this paper we examine four types of tokens within ICOs: pure utility tokens, security tokens, stored value tokens, and hybrid tokens. There is considerable confusion surrounding what each means and signifies, and how each should be treated by both consumers and regulators. We explore the differences, noting what promoters should do to avoid falling into regulatory traps, and the consequences for selecting particular types of token. Because of the confusion around ICO tokens, we suggest there should be a new asset class of token recognised in the Australian Corporations Act. It would have its own funding limits and regulatory framework. Finally, we outline a new code of conduct for ICOs.

Keywords: blockchain, Bitcoin, Ethereum, Ether, ICO, TGE, smart contract, regulation

JEL Classification: G15, G18, G23, G28, G38, K2, K22, K40