ICO regulation faces obstacles, says ASIC chairman

Australia's top securities regulator, ASIC, believes that cryptocurrencies issued by central banks could one day curb illegal applications of decentralized digital currencies such as Bitcoin. In addition, the agency also said that the recent hot ICOs are largely beyond the regulatory scope of global regulators.

In an interview with reporters, Greg Medcraft, chairman of the Australian Securities and Investments Commission (ASIC), spoke publicly about the current state of blockchain technology and its impact on international regulators. Perhaps most notable among Medcraft's remarks was his idea that central bank encrypted digital currencies could hinder illegal cryptocurrency applications. This comment was made in response to the recent Bitcoin extortion incident.

“Depending on the type of digital currency that the central bank releases, the ability to address issues like the black economy and money laundering is huge,” Medcraft said.

Medcraft explained:

“I tend to think that this would be a huge incentive for central banks to issue digital currencies because it does allow you to deal with the problems of abuse of digital currencies such as Bitcoin. For policymakers, the attraction may be the elimination of anonymity, which is very attractive to regulators in terms of combating the black economy and money laundering.”

Medcraft went on to emphasize that he still believes that Bitcoin has the potential to become a store of value and payment system, especially in developing countries and in unstable currency environments. In contrast, in developed countries and regions, he believes that the population that is accustomed to banking services will prefer centralized cryptocurrencies.

“It could change the scene dramatically because it would be a fantastic revolution for people who don’t have access to banking services,” he said. “It could be a massive expansion and it would change the banking industry dramatically.”

In particular, he also pointed out that the central bank digital currency experiments currently being conducted by the Swedish Central Bank, the Central Bank of Singapore and the Central Bank of Senegal may become a global phenomenon in the next few years.

Uncertainty about ICOs

Medcraft also gave his response to the recent hot ICO.

In this regard, he noted that global securities regulators such as ASIC are closely tracking the rapidly evolving ICO space, while also acknowledging that current jurisdictional restrictions make ICOs difficult to regulate.

“There’s no doubt that ICOs are on our radar,” Medcraft said, also pointing to the International Organization of Securities Commissions (IOSCO), the global association of securities and futures regulators.

ICO regulation may involve a billion-dollar market for the cryptocurrency industry, and Medcraft mentioned that the question of how to regulate ICOs is still unresolved because many ICOs do not have the characteristics of traditional securities and are therefore beyond the regulatory scope of traditional securities regulators.

He said:

“It’s a very interesting concept, an ICO is not a stock, you are betting on buying a product at an early stage. Is it like if I go to Kickstarter and crowdfund something, like a watch, I take a picture of that watch and then sell it in the future? It’s no different, right?”

Medcraft said that when it comes to cryptocurrencies, if securities regulators follow their previous definitions and guidance, then ICOs may not fall under their regulatory scope.

He also added that regulators around the world are still in the information collection stage regarding ICOs, and he also revealed that the regulation of ICOs will be included in the agenda of future meetings of the International Organization of Securities Commissions (IOSCO).

He also noted:

“In principle, our aim is to give consumers confidence in the products they are buying and to ensure that the risks of ICOs are properly disclosed.”

He continued:

“If ICOs do fall under our umbrella, we’re going to take a largely technology-neutral approach and say, ‘Okay, how can we make sure that the issuer of the token is disclosed appropriately? Are the risks around the project appropriately disclosed? Are there particular conflicts of interest among the issuers?’”

However, Medcraft also warned:

“It’s important that you don’t rush into anything until you have a clear view on why the ICO market needs to be regulated,” he said. “I think these kinds of things are the product of market development. Our task is to ensure that the market can actually provide funds to the real economy and drive economic growth.”