Australia’s federal court has ruled in favor of fintech firm Block Earner, relieving it from paying a fine despite finding that it offered a crypto yield-bearing product without a financial services license. Justice Ian Jackman determined that Block Earner “acted honestly,” considering obtaining a license before launching its “Earner” product, which provided yields on loans in USD BTC, Ether, and PAX Gold (PAXG). The court’s decision acknowledged Block Earner’s efforts to seek legal advice prior to product launch, signaling a recognition of the company’s proactive approach to regulatory compliance.
In a significant development, the court also ordered the Australian Securities and Investments Commission (ASIC) to pay Block Earner’s costs incurred after February 9, following the court’s ruling that the “Earner” product required an Australian Financial Services License (AFSL). This ruling came despite ASIC’s earlier assertion that the product necessitated such licensing. Moreover, Justice Jackman criticized ASIC for its misleading and unfair press release, which stated that Block Earner’s product “needs” an AFSL, despite the product being discontinued since November 2022.
While Block Earner welcomed the court’s decision and highlighted the reputational damage caused by ASIC’s inaccurate statements, ASIC expressed its intention to review the decision. ASIC had sued Block Earner in November 2022, alleging that both its “Earner” and “DeFi Access” products required a license as they were considered managed investment schemes. However, Justice Jackman’s ruling in February exempted the “DeFi Access” product from punishment, finding that it did not operate under a managed investment scheme and therefore did not need an AFSL.
Despite the court’s ruling in favor of Block Earner, ASIC’s perspective merits consideration. The regulator’s actions were aimed at ensuring compliance with financial regulations and protecting investors from potential risks associated with unlicensed financial services. While Block Earner’s proactive engagement with legal advice is commendable, regulatory oversight remains crucial in safeguarding the integrity of the financial system. Additionally, ASIC’s review of the decision underscores the importance of regulatory agencies in upholding regulatory standards and promoting market transparency. Both perspectives highlight the complexities of navigating regulatory frameworks in the evolving landscape of crypto-based financial services.
