What Is an ICO? Australia 2026 Crypto Guide

What is an ICO?

An initial coin offering (ICO) is a way for a project to raise money over the internet by selling new digital tokens. ASIC’s Moneysmart ICO glossary entry puts it simply: you invest in an ICO by sending money or crypto assets to a blockchain project, and in return you receive digital tokens related to that project.

The tokens might be meant for use inside a future app or network, for voting on how a project is run, or simply as a tradeable asset. What they actually give you depends on how the project designed them, which is why the details matter. Moneysmart describes ICOs as speculative, high-risk investments, and notes that many are for projects that are experimental, at a very early stage, or have not even started.

An ICO is about how tokens are first sold. How those tokens are then supplied, split and unlocked over time is a separate topic called tokenomics, which is worth reading alongside this guide.

How an ICO works

Details vary, but a typical ICO follows these steps:

1. The pitch. The team publishes a white paper and website describing the problem, the planned product and the token.
2. The terms. The project sets a price or pricing formula, sale dates, how many tokens are on offer, and often a fundraising cap. Some sales have early-bird discounts or private rounds before the public sale.
3. The payment. Buyers send crypto, commonly bitcoin or ether, to an address or a smart contract controlled by the project. Some sales also accepted ordinary money.
4. The tokens. Tokens are issued to buyers’ wallets, either during the sale or later, for example when a new blockchain launches.
5. After the sale. The team is supposed to build what it promised. The tokens may be listed on exchanges, but listing is never guaranteed, and many tokens never trade actively.

Many ICO tokens have been issued on existing blockchains rather than new ones. Ethereum made this easier, because anyone can create a token with a smart contract instead of building a whole new network.

The white paper

The white paper is the main document most ICO buyers see. Moneysmart says it typically includes the names and contact details of the people behind the scheme, and information on what they plan to do with your money. It also warns that:

• the information in a white paper is not always accurate, and can be unbalanced or misleading;
• it may overestimate how profitable the project will be;
• projects can change after the white paper is published;
• white papers can be very technical, making it hard to understand your rights after you buy.

A white paper is not a prospectus. In Australia, a prospectus for a regulated offer has to meet disclosure rules under the Corporations Act. A white paper for a token that is not a financial product does not.

A short history of ICOs

• 2013 — Mastercoin. Developer J.R. Willett introduced Mastercoin in 2013 and raised funds by selling its coins. A 2018 paper by Chris Brummer, Trevor Kiviat and Jai Massari, What Is the Proper Disclosure for an ICO?, notes that although many cite Ethereum’s 2014 pre-sale as the first ICO, the title likely goes to Mastercoin. The paper says Mastercoin introduced the “premine”: coins set aside for founders.
• 2014 — Ethereum’s ether sale. On 22 July 2014 Vitalik Buterin announced the ether sale on the Ethereum Foundation blog. Ether was sold for bitcoin, starting at 2,000 ETH per BTC for 14 days before declining to 1,337 ETH per BTC, over 42 days ending 2 September. Buyers could not use or transfer ether until the network launched. According to ethereum.org, that launch, called Frontier, came on 30 July 2015.
• 2017–2018 — the boom. With Ethereum making tokens easy to create, ICOs surged. The Brummer, Kiviat and Massari paper cites an estimated US$5.6 billion raised across 435 ICOs in 2017 alone. ASIC’s INFO 225 describes 2017–2018 as the period when ICOs were an important way of selling digital assets for the first time.
• 2017–2018 — the regulatory response. In July 2017 the US Securities and Exchange Commission issued a report finding that tokens sold by “The DAO” were securities, and warning that offers and sales described as “Initial Coin Offerings” or “Token Sales” may be subject to US securities laws, depending on the facts and circumstances. In 2018 ASIC announced action on misleading or deceptive conduct in Australian ICOs (more below).
• After the boom. Many projects failed, and fundraising shifted to other formats. ASIC notes that other approaches to selling and distributing digital assets have emerged since, including exchange and DEX launches and airdrops.

ICO vs IEO vs IDO

Moneysmart links ICOs to two related terms: initial exchange offerings (IEOs) and initial DEX offerings (IDOs). It notes that IEOs and IDOs occur on exchanges, while ICOs can be made directly by the project developers.

A venue’s involvement is not an endorsement and does not make a token safe. For how DEXs and liquidity pools work, see our DEX guide and what is DeFi guide.

ICO vs IPO and crowd-sourced funding

The names sound alike, but Moneysmart draws a clear line. ICOs may not offer any legal rights and protections, and investing in an IPO means investing in an established company or asset, rather than a project. ICOs are also not the same as crowd-sourced funding, which offers basic investor protections under Australian law.

ASIC’s INFO 225 notes the ICO process has characteristics similar to an IPO or crowd-funding sale. When a token does carry share-like rights, it may be regulated like those offers. When it does not, buyers may have few of the protections they would expect from a share offer.

The main risks

• Project failure. Moneysmart notes a large number of ICOs fail or do not increase in value, and some projects take years to become viable, if ever.
• Few rights. A token may give you no ownership, no say in the project and no claim on its money.
• Information gaps. White papers can be incomplete, misleading or changed after the sale.
• Supply and unlocks. Large allocations to founders and early investors can be sold once they unlock. Check the token’s tokenomics.
• Liquidity. There may be no market to sell the token, or only a thin one.
• Technical risk. Smart contracts can have bugs, and sale websites can be cloned by scammers.
• Price swings. Even where a token trades, its price can move sharply. This guide does not predict prices.

ICO scams and red flags

Moneysmart’s crypto scams page lists ICO and crypto launchpad “rug pull” scams: a token is hyped through marketing and social media, sometimes marketed as a token pre-sale, and when enough money comes in the scammer cashes out and disappears, leaving the token worthless. Our rug pull guide covers how they work.

Warning signs worth noticing:

• promises of guaranteed or very high returns;
• pressure to buy before a countdown ends;
• anonymous teams, or team members you cannot verify;
• celebrity or influencer promotions you cannot confirm;
• being contacted out of the blue, or added to a group chat promoting a presale;
• payment addresses shared in direct messages rather than on the official site;
• no clear explanation of what the token does or what rights it gives.

Scammers also impersonate real launches with copycat websites and fake “claim” pages. Our crypto scams guide and hot wallet guide explain how to protect your wallet when connecting to sale sites.

How ASIC treats ICOs in Australia

Rights, not labels. ASIC’s Information Sheet 225, Digital assets: Financial products and services, says that when an ICO is undertaken to fund a company, or an undertaking that looks like a company, the rights attached to the token may make it a security (such as a share, an option or a debenture) or an interest in a managed investment scheme. INFO 225 explains that most shares offered to the public carry rights such as ownership of the company, voting, a share of future profits through dividends, and a claim on remaining assets if the company is wound up. INFO 225 also says categories used by overseas regulators, such as “utility tokens”, do not necessarily translate to Australia: what matters is the particular rights and benefits of each digital asset under Australian law.

If it is a financial product. Corporations Act obligations can apply. INFO 225 says that where an issuer appears to be offering a security, it will generally need to prepare a prospectus if the offer is to retail investors, and a prospectus must contain all the information consumers reasonably need to make an informed investment decision. INFO 225 also works through examples, including a company pre-selling tokens in its white paper to fund a new blockchain.

Misleading conduct is banned either way. In media release 18-122MR (2018), ASIC said it was issuing inquiries to ICO issuers and advisers over potentially misleading or deceptive statements, and that some issuers halted their ICO or changed its structure as a result. ASIC said that on 19 April 2018 it received delegated powers from the ACCC to act under the Australian Consumer Law on crypto-assets, so it can act against misleading or deceptive conduct in marketing or selling ICOs even when no financial product is involved. It also described stopping one ICO that it said was an unregulated managed investment scheme with potentially misleading statements in its white paper.

If something goes wrong. Report scams to Scamwatch and contact your bank or exchange quickly. Be wary of anyone offering to recover lost crypto for a fee. Our what is FUD guide covers how to check alarming claims at the source, which applies equally to hype.

Eagle BTM Pty Ltd ACN 659 281 820 publishes this education site and is an AUSTRAC-registered DCE/VASP. AUSTRAC registration is not an Australian financial services licence, and nothing here recommends a token, sale or platform or is a recommendation to buy, sell or hold any asset. Jittie is in pre-launch. Join the waitlist for launch updates. General information only — not financial, tax, or legal advice.

Questions to ask about any token sale

1. Who is behind it, and can I verify them independently?
2. What exactly does the token give me: rights, uses, or nothing?
3. What is the money for, and what happens if the project changes course?
4. How much of the supply goes to the team and early investors, and when does it unlock?
5. Is the sale page the official one, reached from a source I trust, not a link in a message?
6. Does the offer mention Australian law, and is anyone claiming I will get guaranteed returns?
7. Could I afford to lose all of the money I am thinking of putting in?

If you cannot answer these, that is useful information in itself. For stable-value tokens, which work very differently from ICO tokens, see our stablecoin guide.

Frequently Asked Questions