In a ground-breaking legal decision, the Australian Securities and Investments Commission (ASIC) has secured its first court victory concerning a non-cash payment facility involving crypto assets. The Federal Court ruled against BPS Financial Pty Ltd (BPS), the company behind the crypto-asset token “Qoin”, marking a significant milestone in the regulation of digital financial products.
The case revolved around the legal classification and regulatory compliance of Qoin, a digital token designed to facilitate transactions within its network. ASIC argued that Qoin operated as a non-cash payment facility and, as such, should be subject to the stringent regulatory requirements applicable to similar financial products. The Federal Court’s decision affirmed ASIC’s stance, recognising the necessity of regulatory oversight in the crypto asset sector to ensure consumer protection and market integrity.
The Court held that BPS contravened the Corporations Act 2010 (Cth) as it did not hold an Australian Financial Services Licence, nor was it authorised by a licence holder to issue or provide financial advice bout the Qoin Wallet. Moreover, Justice Downes found that BPS engaged in misleading and deceptive conduct regarding the Qoin Wallet, claiming it was officially registered/approved (when it was not), it could be used to purchase goods and services from an increasing number of merchants, and consumers would be able to exchange Qoin tokens for other cryptocurrency assets or dollars.
The ruling has broader implications for the crypto asset market in Australia. It sets a precedent for how digital tokens and similar products will be regulated, ensuring that companies operating in this space cannot circumvent regulatory scrutiny. Moreover, it could mean that crypto-based products could qualify as financial products under the Corporations Act and be required to comply within the relevant regulatory constraints.
For a full reading of the media release, see here.
