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Crypto-asset provider operating without an AFSL

Friday 25 November 2022

 
The Australian Securities and Investments Commission (ASIC) has begun civil penalty proceedings against ha fintech company for providing unlicensed financial services  for ‘crypto-asset based products.’

Block Earner is alleged to have offered a collection of the crypto asset-based products under the title Earner Products that were not licenced but should have been because the products were ‘managed investment scheme, a facility  through which a person makes  a financial investment, and /or  a derivative.’

ASIC Deputy Chair Sarah Court said in an official statement, “We are concerned that Block Earner offered financial products without appropriate registration or an Australian Financial Services licence, leaving consumers without important protections. Simply because a product hinges on a crypto-asset, does not mean it falls outside financial services law.”

Just last month, alleged that another company offering crypto assets, BPS, was involved in misleading and deceptive conduct and the securities regulator placed a stop order on Holon Australian Investments Limited for 'non-compliant target market determinations [TMD].’
 
The regulator is focused on Crypto as high-risk
Last October, the securities and investment regulator published Information Sheet 225 Crypto-Assets and Information Sheet 230 Exchange traded products: Admission Guidelines.

At the time ASIC Commissioner Cathie Amour said, “Crypto-assets have unique characteristics and risks that must be considered by product issuers and market operators in meeting their existing regulatory obligations. The good practices we published provide practical examples of how these obligations may be met, in a way that maintains investor protections and Australia’s fair, orderly and transparent markets.”

Since then, the regulator has also highlighted Crypto-assets as a focus for their enforcement priorities for 2022 to 2023. On the regulator’s enforcement priorities list they are grouped with other high-risk products.

ASIC Chair Joe Longo highlighted that there are many unknowns in the crypto space for the regulator and prospective investors.

“My central message for consumers is that this is a risky, speculative and poorly understood activity, which has to be distinguished from the innovation of the underlying technology.”

Since then, the regulator has also suspended the financial licence of FTX Australia for potential misconduct.

AISC will be watching the results of the joint international investigation conducted by the American and Bahamian regulators.

 

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