The Australian Securities and Investments Commission has sued BPS Financial Pty Ltd for allegedly making false, misleading or deceptive representations and engaging in unlicensed conduct.
At the center of the dispute is a non-cash payment facility involving a crypto-asset token called Qoin (the Qoin Facility).
The complaint brought to the Federal Court alleges that in marketing the Qoin Facility, BPS made false, misleading or deceptive representations, including that:
- consumers who have purchased Qoin tokens can be confident that they will be able to exchange them for other crypto-assets or fiat currency (such as Australian dollars) through independent exchanges,
- Qoin tokens can be used to purchase goods and services from an increasing number of merchants registered with BPS,
- the Qoin Facility and/or the Qoin wallet application used to transact Qoin tokens are regulated, registered and/or approved in Australia, and
- the Qoin Facility and/or BPS are compliant with financial services laws.
Qoin Facility regulated in Australia? Nope
ASIC Deputy Chair Sarah Court said: “We allege that, despite what BPS represented in its marketing, Qoin merchant numbers have been declining, and that there have been periods of time where it was not possible to exchange Qoin tokens through independent exchanges. ASIC is particularly concerned about the alleged misrepresentation that the Qoin Facility is regulated in Australia, as we believe the more than 79,000 individuals and entities who have been issued with the Qoin Facility may have believed that it was compliant with financial services laws, when ASIC considers it was not.
“Where it falls within our remit, ASIC will take targeted action against unlicensed conduct and misleading promotion of crypto-asset financial products that could harm consumers – this is a key priority for ASIC. Crypto-assets are highly volatile, inherently risky, and complex. Every crypto-asset is different, often making it difficult to compare with each other – or anything else. This makes it crucially important that investors are provided with honest and accurate information.”
Qoin tokens, wallet, payments
According to ASIC, the Qoin Facility is a non-cash payment facility that was established by BPS in January 2020 and includes: Qoin tokens,
the Qoin wallet, and a distributed digital ledger implemented by blockchain technology.
BPS promoted Qoin tokens to retail consumers and business owners as a means of making payment for goods and services offered by Qoin Merchants.
Since December 2020, Block Trade Exchange Pty Ltd (BTX), a related entity of BPS, has operated the BTX Exchange, by which Qoin tokens can be exchanged for Australian dollars. However, increasingly restrictive limits were imposed on exchanging Qoin tokens for Australian dollars on the BTX Exchange over time.
Crypto businesses must comply with ASIC guidance in Australia
ASIC Information Sheet 225: Crypto Assets provides guidance on the circumstances in which a crypto-asset-related offering may be a financial product.
A range of Australian laws apply to entities giving advice, dealing, providing insurance, or providing other intermediary services for crypto-assets that are financial products. These include the requirement to hold an AFS licence or appropriate authorisation by an AFS licence holder.