Q&As

Dr McCullagh on Initial Coin Offering’s (ICO’s)

Wednesday July 12, 2017

Adrian McCullagh, Principal of Odmob Lawyers, has extensive knowledge in these areas

123and is able to provide cost effective and timely legal advice. Adrian has being a solicitor for 30 years and having concentrated on IT law, and IT security law. He presently advising on Blockchain technology and its legal impact.

You can hear more from Adrian at 2nd Annual Credit Law Symposuim seminar, being held on Thursday 07 September at Hilton Sydney.

He joined Ashleigh Tesluk of Legalwise Seminars to discuss issues about Initial Coin Offering’s (ICO’s).

You can find the full Q&A below.

What are some of the key trends and developments in fintech, credit and lending that are having an impact right now?

The fintech environment is rapidly being impacted by non-jurisdictional offerings that are being made available through the internet.  A sector of the global community has decided that what is being offered is what they want to invest in even though it is highly possible that they do not understand the nebulous nature of the offering.

What is ‘ICO’ and why is it important?

An ICO is the acronym for “Initial Coin Offering”.  It is a misnomer as there is actually no “coin” involved.  An ICO is a new method adopted by blockchain entrepreneurs to raise capital through the issuing of a cryptographic token which will be stored on a blockchain.  The token can be its own value which can be later traded for other tokens or exchanged for some virtual currency such as bitcoin or ether or litecoin etc.  Alternatively, the token can be a prepayment of a service to be provided by the organisation sponsoring the ICO.

Who is/will be affected by ICO and why?

Startups are obviously taking advantage of this new type of capital raising.  The Venture Capital market is directly affected by this new form of capital raising.  In effect this structure can bypass the VC market entirely as well as the ASX.  Importantly, no securities must be involved in the capital raising.

What is the Regulator’s position in relation to ICOs?

The difficulty for ASIC is how do you regulate a capital raising that does not involve the issuing of a security.  The token will have a life of its own independent of the organisation promoting the token or offering the service.

Other regulators may become involved but then jurisdictional issues arise.

What is the one thing that people often overlook in relation to ICO?

The nebulous nature of the offering and the detail that they should expect in the offering document.  Further there currently no legislation providing any protections similar to what is available for an IPO.

Are there any fintech, credit or lending issues coming in 2018/the future that you think practitioners should keep on their radar?

ASIC stepping in if there is a major fault with an ICO.  ASIC may lobby Parliament to alter the corporations Act to regulate anyone who promotes an ICO within Australia.

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