Australian Federal Court Rules Mostly in Favor of Regulator in Case Against BPS Financial

The Australian Federal Court has delivered a ruling mostly in favor of Australia’s markets regulator in its case against BPS Financial Pty Ltd (BPS) over its Qoin scheme. 

On Friday, Judge J Downes concluded that the Australian Securities and Investments Commission (ASIC) succeeded in its Unlicensed Conduct Case against BPS, according to court documents. 

However, the ruling excluded the period when BPS functioned as an authorized representative of PNI Financial Services Pty Ltd, which holds a non-cash payments license.

The authorized representation lasted for a duration of 10 months, as stated by ASIC.

ASIC Sues BPS Over Qoin Scheme

The legal dispute between ASIC and BPS dates back to 2022 when ASIC filed a lawsuit, seeking a court ruling that the entire Qoin project, including the token, blockchain, and wallet, constituted a financial product requiring a license.

ASIC’s argument included the allegation that the Qoin Blockchain and Qoin Wallets formed a single scheme. However, the court disagreed with this assertion. 

#Australian court rules against #Qoin issuer #BPS Financial on 4 charges :Qoin still has a class-action suit pending against it in addition to the case brought by regulator #ASIC.

The Federal Court of Australia found that BPS made four false claims. Specifically, #BPS claimed… pic.twitter.com/aryu04l0e3

— TOBTC (@_TOBTC) May 4, 2024

In the court order, it was stated that the Qoin Blockchain, the means of acquiring Qoin, and the registration process for business operators as Qoin Merchants were not components of the mechanism enabling non-cash payments.

Legal experts have highlighted the significance of the court’s rejection of ASIC’s attempt to classify an entire blockchain as a “financial product” under Australian law. 

Michael Bacina, Blockchain Australia Chair and Digital Assets Lawyer, emphasized that the ruling acknowledged blockchains as foundational technology, separate from the legal implications of their usage.

Following the ruling, ASIC and BPS have been directed to confer and come to an agreement on the remaining issues, including the assessment of penalties, scheduled for later this month.

Crypto Under Scrutiny in Australia

It is worth noting that crypto has been under increasing scrutiny in Australia.

In May last year, cryptocurrency exchange Binance Australia told customers they would lose 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) even conducted searches at Binance Australia‘s offices.

Moreover, in March, Australia’s prudential regulator instructed banks to report their exposures to crypto firms and startups following the collapse of the Silicon Valley Bank and the resulting turmoil in the banking sector.

The APRA asked local banks to improve their reports on crypto assets and provide daily updates to the regulator to gain more insight into potential vulnerabilities in the system.

In October, the Australian government also unveiled a proposal intended to subject digital asset platforms to the same laws that govern other financial services providers.

As part of the plan, crypto platform operators will be required to obtain a financial services license, as well as continuous monitoring and routine audits of customer funds.

In response to increasing restrictions on crypto payments, Blockchain Australia, an industry body representing the Blockchain and digital currency industry in Australia, has launched new initiatives to tackle the issue of crypto scams and frauds.

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