An Australian court has rejected claims concerning Block Earner’s DeFi “Access” service in a legal dispute initiated by the Australian Securities and Investments Commission (ASIC).
Justice Ian McNeil Jackman, overseeing the case, has issued a divided verdict.
While dismissing accusations linked to the firm’s DeFi “Access” service, the court ruled that Block Earner had conducted unlicensed financial activities with its cryptocurrency-backed Earner product.
ASIC Accused Block Earner of Providing Unlicensed Services
ASIC filed a lawsuit against Block Earner in November 2022, alleging that the company offered unlicensed fixed-yield earning products based on cryptocurrency assets.
It’s noteworthy that Block Earner, with backing from prominent crypto exchange Coinbase, voluntarily discontinued its fixed-yield “Earner” service in the same month.
Sarah Court, ASIC’s Deputy Chair, emphasized the significance of the court’s ruling, stating that it provides clarification on when crypto-backed products should be classified as financial products requiring licensing under the law.
“This pivotal ruling offers clarity on the classification of crypto-backed products as financial products subject to licensing under the law,” she remarked.
“Firms providing products involving crypto-assets must carefully assess whether their offerings fall under the definition of financial products within the current regulatory framework. If they do, they must ensure appropriate licensing and authorization before distribution.”
Block Earner to Resume Offering DeFi “Access” Service
With the dismissal of allegations against Block Earner’s DeFi “Access” service, the company is permitted to continue offering this specific service.
A hearing scheduled for March 1, 2024, will determine the fine imposed on Block Earner for its involvement in unlicensed financial services activities.
It’s important to note that cryptocurrency has faced escalating scrutiny in Australia.
In May, Binance Australia, a cryptocurrency exchange, notified customers of the loss of access to Australian dollar deposits and withdrawals due to a decision by its third-party service provider.
In July, officials from the Australian Securities and Investments Commission (ASIC) conducted searches at Binance Australia’s offices.
Furthermore, in March, Australia’s prudential regulator instructed banks to disclose their exposures to cryptocurrency firms and startups following the collapse of the Silicon Valley Bank and ensuing turbulence in the banking sector.
APRA requested local banks to enhance their reporting on crypto assets and provide daily updates to the regulator to gain deeper insights into potential vulnerabilities in the system.
In October, the Australian government introduced a proposal aimed at subjecting digital asset platforms to the same regulations governing other financial services providers.
Under this proposal, operators of crypto platforms would need to obtain a financial services license, implement continuous monitoring, and conduct regular audits of customer funds.
In response to the tightening regulations on crypto payments, Blockchain Australia, an industry body representing the Blockchain and digital currency sector in Australia, has launched new initiatives to address the issue of crypto scams and fraud.
As part of the new plan, the organization will implement various measures, including educational programs, roundtable discussions, and more.