An Australian federal court has ruled that Web3 Ventures Pty Ltd, operating under its tradename Block Earner, has been offering crypto products without obtaining a necessary financial services license. It was one of the country’s first such court rulings against a crypto product.
Block Earner offered the ‘Earner’ product, which allowed its users to earn fixed yield returns from different crypto-assets. The company operated between March 2022 and November 2022.
The Australian Securities and Investments Commission (ASIC) first cracked down on the company in November 2022 with allegations of providing unlicensed financial services with cryptocurrency offerings and operating an unregistered managed investment scheme. The regulator is now considering to seek monetary penalties.
“This important decision provides some clarity as to when crypto-backed products should be considered financial products that require licensing under the law,” said ASIC Deputy Chair Sarah Court.
“Crypto assets are risky, inherently volatile, and complex. ASIC remains concerned that consumers do not fully appreciate the risks associated with products involving crypto-assets and today’s decision is an important step forward to ensuring there are appropriate protections for consumers.”
Partial Victory for ASIC
However, the court squashed ASIC’s allegations of characterizing Block Earner’s variable yield crypto-asset-based offering as a financial product. Although the product provides users access to decentralized finance lending protocols, the regulator considered it a financial product as it had the characteristics of a managed investment scheme, investment facility, or derivative.
Block Earner has no Australia Financial Services (AFS) license but is an AUSTRAC-registered digital currency exchange. It offered several cryptocurrency-based fixed-yield earning products, including USD Earner, Gold Earner, and Crypto Earner, collectively known as Earner Products.
Meanwhile, ASIC also targeted several other crypto firms for their unlicensed operations. Last September, the Aussie regulator sued the local operator of the crypto exchange Kraken over design and distribution obligations failure for the margin trading product.
“Firms offering products with crypto-assets must carefully consider whether their offerings are financial…