SYDNEY, Australia – In a significant victory for the crypto industry, an Australian Federal Court has made a “landmark” judgment that dismissed a case brought by the country’s market regulator against Finder Wallet. The case alleged that the Finder Earn product offering violated the Corporations Act by operating as a financial services business without the necessary license. However, the court ruled in favor of Finder Wallet, stating that the Australian Securities and Investment Commission (ASIC) failed to prove that the product was a debenture. As a result, ASIC has been ordered to pay the defendant’s costs.
The outcome of this case highlights the importance of collaboration between policymakers, regulators, and industry players in providing clear guidance to avoid unnecessary time and costs associated with regulation through enforcement. Michael Bacina, Chair of Blockchain Australia and Digital Assets Lawyer, emphasized the significance of this ruling.
In November 2022, Finder ceased its Earn product shortly after the FTX meltdown, citing its lack of competitiveness in a market with higher interest rates. While the company currently has no plans to relaunch the product, a Finder spokesperson stated, “never say never.” ASIC still has the option to appeal the ruling within the next 28 days.
This case marks the first instance in Australia where a crypto asset has been considered as a debenture, and it was only the second instance where ASIC pursued legal action against a crypto-related entity relating to yield products. Earlier, a Sydney-based crypto startup called Block Earner had also faced legal proceedings from ASIC, resulting in a split decision. Block Earner was found to have engaged in unlicensed financial services conduct, but the allegations linked to its DeFi “Access” service were dismissed.
The ASIC Executive Director of Enforcement and Compliance, Tim Mullaly, explained that the pursuit of this matter was driven by the belief that the product was being offered without the necessary license and without the consumer protections that come with it.
Looking ahead, Australia’s Treasury has announced its intention to release draft legislation covering licensing and custody rules for crypto asset providers by 2024. Once such legislation becomes law, exchanges will have a 12-month transition period to adapt to the new regulatory framework.
This ruling and the ongoing regulatory developments in Australia further contribute to the global efforts to establish clear rules and guidelines for the crypto industry, ensuring consumer protection and fostering its growth and innovation.