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Product Disclosure Statements for Digital Assets

If your crypto token is a financial product and you are issuing or selling it to retail clients, you generally must give a Product Disclosure Statement (PDS) under ss 1012A-1012C.

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Part 7.9, Corporations Act

If your crypto token is a financial product and you're issuing or selling it to retail clients, you generally must give a Product Disclosure Statement (PDS). The obligation to give a PDS is in ss 1012A–1012C. Section 1013A sets out who must prepare it.

PDS must include (ss 1013C, 1013D and 1013E):

  • Significant benefits and risks
  • Cost of the product and fees payable (in the prescribed form where the regulations require it)
  • Other significant characteristics and features of the product
  • Dispute resolution arrangements
  • Cooling-off rights (if any)
  • Significant taxation implications (general)

Crypto-specific disclosure challenges:

  • Smart contract risk (bugs, exploits, upgrade mechanisms)
  • Protocol governance risk: who can change the rules?
  • Liquidity risk: can holders actually exit?
  • Custody risk (key management, counterparty exposure)
  • Regulatory risk (the rules are still forming: the new digital asset platform regime starts on 8 April 2027)
  • Technology risk (chain forks, consensus failures)

ASIC expectations (RG 168):

A PDS must be clear, concise and effective, with material risks up front and out of the boilerplate. ASIC has intervened on PDS quality for traditional products. Expect the same scrutiny for crypto.

Wholesale exemption (s 761G): If dealing only with wholesale clients (for example, product value of at least $500,000, an accountant's certificate, a professional investor or a sophisticated investor), a PDS is not required. But marketing materials still can't be misleading.

Product Disclosure Statements for Digital Assets: the detail

What matters when you structure a token issuance or dealing arrangement in Australia.

  1. When Does the PDS Obligation Apply?

The threshold question is: is the token a financial product? If yes (under the general definition in s 763A or as a specific product listed in s 764A, such as an MIS interest or a derivative), then Part 7.9 can apply when you:

  • Issue the product to a retail client, or make an offer to issue it (s 1012B)
  • Sell the product to a retail client in certain sale situations, such as off-market sales by a controller or sales amounting to an indirect issue (s 1012C)
  • Give personal advice to a retail client recommending that they acquire the product (s 1012A). This one catches intermediaries and platforms. General advice alone does not trigger a PDS obligation

Part 7.9 does not apply to securities (such as shares and debentures), which are dealt with under Chapter 6D (prospectus) instead (s 1010A).

Timing: generally the PDS must be given when the recommendation is made, or at or before the time the offer is made or the product is issued or sold (ss 1012A(3), 1012B(3), 1012C(3)). Where the client makes the offer to acquire, it must be given before the client becomes bound (s 1012B(4)). Section 1015C sets how the PDS is given, and s 1012D sets out situations where a PDS is not required.

  1. Mandatory Content Applied to Crypto

Section 1013D (main requirements) and 1013E (other information that might influence a decision) set the minimum. This is how each maps to digital assets:

Statutory RequirementCrypto Application
Issuer name and contact details (s 1013D(1)(a))Identify the legal issuer, which may not be the "foundation" or DAO named on the website
Significant benefits (s 1013D(1)(b))Utility, governance rights, staking yield, protocol access. Be specific about what the token actually does
Significant risks (s 1013D(1)(c))Smart contract risk, oracle dependency, governance attack vectors, liquidity, regulatory change, chain-level risks
Costs and amounts payable (s 1013D(1)(d))Gas fees, protocol fees, management fees (if MIS), performance fees, entry/exit spreads. RG 97 applies to fees and costs disclosure for the products it covers
Other significant characteristics (s 1013D(1)(f))Token mechanics, consensus mechanism, upgrade paths, governance model, smart contract addresses
Dispute resolution (s 1013D(1)(g))Internal complaints + AFCA membership (required for AFS licensees dealing with retail clients). On-chain "governance" is no substitute
Tax (s 1013D(1)(h))CGT event on disposal, income characterisation of staking/yield, GST position (likely input-taxed financial supply)
Cooling-off (s 1013D(1)(i); ss 1019A–1019B)A 14-day cooling-off right (s 1019B) applies only to the classes listed in s 1019A, which are risk insurance, investment life insurance, managed investment products, foreign passport fund products, superannuation and RSAs, when issued (or sold under s 1012C) to a retail client. So a token that is, for example, a derivative or a non-cash payment facility has no statutory cooling-off right. Exceptions apply, for example interests in a managed investment scheme that is not liquid (Corporations Regulations reg 7.9.64(1)(e)). Problem: blockchain transactions are irreversible. You need a mechanism: escrow, off-chain holding period, or clear disclosure of how the right is honoured in practice
  1. The s 1013E Catch-All

ASIC relies on this section heavily. Beyond the prescribed content, you must disclose any other information that might reasonably be expected to have a material influence on a retail client's decision to acquire the product.

For crypto, this means:

  • Key person risk: if the protocol depends on a core dev team, say so
  • Token concentration: if 40% of supply sits with founders/VCs, disclose it
  • Upgrade/fork risk: can the smart contract be upgraded unilaterally? Proxy patterns? Multisig control?
  • Bridge/cross-chain risk: if the token operates across chains, the bridge is a material risk factor
  • Regulatory pipeline: if there's a realistic prospect of regulatory change that could affect the product (for example, the Corporations Amendment (Digital Assets Framework) Act 2026, which commences on 8 April 2027), consider disclosing it
  1. RG 168: Clear, Concise, Effective

ASIC's Regulatory Guide 168 isn't crypto-specific, but it applies in full:

  • Shorter is better: long documents that bury risks make it harder for retail clients to understand the product, and ASIC can use its stop order powers where a PDS is defective
  • Use plain language: write "the smart contract may contain undiscovered vulnerabilities that could result in loss of your entire investment", in place of "technological risks may exist"
  • Key information upfront: fees summary, risk summary, and product description should be in the first few pages
  • No burying: a material risk goes in the risk section with appropriate prominence, never in a footnote on page 47
  1. ASIC Stop Orders (s 1020E)

ASIC can make an interim stop order without a hearing, lasting 21 days, if it considers that delay pending a hearing would be prejudicial to the public interest (s 1020E(5)). Stop orders are available where, for example, a PDS is defective. This means:

  • Your token sale stops immediately
  • ASIC usually announces stop orders publicly, with the reputational damage that follows
  • You fix the problem and ask ASIC to revoke the order, or
  • ASIC makes a final order after a hearing

ASIC has a separate stop order power under the design and distribution obligations (s 994J), and it has used that one on crypto funds. In October 2022 ASIC made interim stop orders on three Holon funds (bitcoin, ether and Filecoin) because it considered their target market determinations too wide. It extended the orders after a hearing, then revoked them on 14 November 2022 when Holon decided to wind up the funds. No final orders were made (ASIC 22-278MR, editor's note).

  1. The Wholesale Exemption (s 761G)

No PDS required for wholesale clients. The main tests in s 761G(7):

  • Product value or price at or above the regulated amount, $500,000 for investment-based financial products (s 761G(7)(a); Corporations Regulations regs 7.1.18 and 7.1.19)
  • Accountant's certificate (given within the preceding 6 months) that the client has net assets of at least $2.5 million or gross income of at least $250,000 for each of the last 2 financial years (s 761G(7)(c); Corporations Regulations reg 7.1.28)
  • Professional investor (s 761G(7)(d); defined in s 9): AFSL holder, listed entity, etc.
  • Sophisticated investor (s 761GA): the licensee is satisfied, on reasonable grounds, that the client has enough experience, and the other s 761GA conditions are met

But: Even wholesale-only issuances must comply with:

  • Misleading and deceptive conduct prohibitions (s 1041H of the Corporations Act and s 12DA of the ASIC Act; the Australian Consumer Law does not apply to financial services: CCA s 131A)
  • Market misconduct prohibitions (Part 7.10)
  • AML/CTF obligations (if you're a reporting entity)

An information memorandum isn't legally required for wholesale offers, but it is common practice and can help show what investors were told.

  1. Practical Drafting Notes

If you're building a PDS for a crypto product:

  1. Get the product characterisation right first: MIS, derivative, security, or novel? This determines which specific disclosure rules layer on top of Part 7.9
  2. Smart contract audit: get one, disclose the findings (including limitations), and reference the auditor
  3. Material changes: issuers must notify holders of material changes and significant events (s 1017B). A Supplementary PDS (ss 1014A–1014F) can correct a misleading statement or omission, or update the PDS; a Replacement PDS is dealt with separately (ss 1014H–1014L). If a PDS turns out to be defective, s 1016E sets out what the issuer must do with applications not yet satisfied (for example, refund, or give a Supplementary or new PDS and a 1-month withdrawal right). Protocol upgrades, governance changes, and security incidents can all be relevant
  4. Digital delivery: s 1015C allows a PDS to be sent to an electronic address the client (or their agent) has nominated. Other methods, such as making it available online, must be agreed to by the client (Corporations Regulations reg 7.9.02A). An electronic PDS must, as far as practicable, be presented so the client can keep a copy (reg 7.9.02B)

Separately, from 8 April 2027 the Corporations Amendment (Digital Assets Framework) Act 2026 requires a licensee issuing a digital asset platform or tokenised custody platform to a retail client to first give a "DAP/TCP Guide" (new s 1020AN).

Bottom line: The PDS regime applies to crypto tokens that are financial products in the same way as to any traditional product. The hard part is mapping blockchain-native concepts into disclosure categories designed for managed funds and insurance policies. Get the mapping wrong and you're looking at a stop order, or worse, a misleading disclosure action.

This is general information, not legal advice.

Questions? Email [email protected].

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