“We’ve taken this action because we want to make it clear and send a message to the market that you can’t evade getting a financial services licence just because you have the word crypto in the product name.”
She said if the court ruled that they were financial products, it would send a clear message to others operating in the area. Contravening the Corporations Act by operating without a financial licence can attract penalties in the millions.
Earlier this year, ASIC said that identifying misconduct involving high-risk products such as crypto was one of its enforcement priorities. Last month, it launched legal action against BPS Financial, the Gold Coast company behind crypto asset Qoin, alleging it had engaged in unlicensed conduct and released misleading promotional material. The company has said it will defend the matter.
On Tuesday, Block Earner chief executive Charlie Karaboga said ASIC’s action was “a disappointing outcome”.
“We welcome regulation in our space and have spent considerable resources building regulatory infrastructure to be able to deliver a whole suite of services to Australian users in a regulated and compliant manner under existing guidelines provided by ASIC,” Karaboga said.
“Since inception, customers’ funds with Block Earner have been protected against crypto market volatility like the recent FTX downfall and earlier cryptocurrency market crashes, and customers are able to withdraw their funds at any time.”
Block Earner released a statement last week saying it had no exposure of any kind to FTX, its subsidiaries or connected parties, and customer’s assets were secure.
The federal government announced in August that Australia would become the first country to chart the number, type and underlying code of available cryptocurrencies. It will “token map” the Australian crypto asset sector as a first step towards fresh regulation in the area, which the tax office estimates more than one million people have “interacted” with since 2018.
The industry has been calling on the government to introduce legislation to reduce the risk for investors and turn crypto into an established, safer asset class. The former government developed draft reforms last year which regulators and Treasury are assessing and implementing.
Court said ASIC was supporting Treasury in their efforts and have been providing them with information in the market to help the development of the regulatory framework.
“We need regulation that focuses on consumers and investors,” said Court.
“Without wanting to build on any of the hype associated with the collapse of FTX, it is a very stark reminder about what happens when the innovation and creativity takes over and investors and consumers are not put front and centre. These are serious issues involving real people’s money.”
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