By Jim Bulling and Rebecca Gill
On 1 August 2019, the Australian Securities Exchange (ASX) published its Compliance Update (Update) which sets out its guidance for listed entities that are proposing to engage in cryptocurrency-related activities, being initial coin offerings (ICOs) and initial exchange offerings (IEOs).
The Update notes that many tokens offered to investors in Australia as part of an ICO or an IEO may be regulated by the Corporations Act 2001 (Cth) as the tokens may constitute interests in managed investment schemes. As such, listed entities should seek legal advice prior to engaging in cryptocurrency-related activities.
Listed entities will also need to ensure they are complying with the listing rules, including the following:
- Listing rule 11.1: entities will need to notify ASX under this rule for cryptocurrency-related activities as such activities may involve a significant change in the nature or scale of the entities’ activities. If ASX forms the view that such activities are likely to result in significant change, then ASX is likely to require entities to seek security-holder approvals for the changes and to re-comply with admission requirements.
- Listing rule 12.5: entities must ensure they have appropriate structures and operations in place for cryptocurrency-related activities. The Update notes that a breach of this rule may result in an entity’s securities being suspended from quotation.
- Listing rule 3.1: entities looking to make announcements about proposed cryptocurrency-related activities must only make the announcements once the proposals are well-developed, and must include an appropriate level of detail for ICOs or IEOs, including the specific rights offered by the tokens.
Entities that make announcements for ICOs or IEOs that lack the detail required under listing rule 3.1 may find themselves suspended until they provide further information. Further, entities must avoid making announcements that claim their cryptocurrency-related activities have been “approved by” or are “regulated by” ASX. ASX considers such claims to be misleading as ASX only regulates cryptocurrency-related activities to the extent they raise issues under the listing rules. Accordingly, any such claims are likely to result in immediate trading suspension.