Australian Securities and Investments Commission v BPS Financial Pty Ltd

In a move demonstrating its consumer protection awareness, ASIC has commenced civil penalty proceedings in the Federal Court of Australia against BPS over alleged false, misleading or deceptive representations and alleged engagement in unlicensed conduct in relation to a non-cash payment facility involving a crypto-asset token called Qoin (the Qoin Facility). 

ASIC alleges that BPS promoted Qoin tokens to retail consumers and business owners as a means of making payment for goods and services offered by those consumers and business owners. The Qoin token was traded on the BTX Exchange and could be exchanged for Australian dollars. ASIC alleges that in marketing the Qoin token, BPS made false, misleading and deceptive statements to the effect that: 

1. 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;
2. Qoin tokens can be used to purchase goods and services from an increasing number of merchants registered with BPS;
3. the Qoin Facility and/or the Qoin wallet application used to transact Qoin tokens are regulated, registered and/or approved in Australia, and
4. the Qoin Facility and/or BPS are compliant with financial services laws.

However, according to a media release issued by ASIC, restrictive limits were imposed on exchanging Qoin tokens for Australian dollars on the BTX Exchange over time resulting in periods where it was not possible to exchange Qoin to a fiat currency at all. Further, ASIC has alleged that since 2020 BPS has operated a financial services business without holding the relevant Australian financial services licence. 

The full originating application can be read here. A date for the first hearing is yet to be scheduled by the Court. 

What does this mean?

ASIC is showing an increased appetite to pursue organisations that it considers are:

1. operating without the relevant licenses in the cypto-asset space; and 
2. not compliant with relevant consumer protection laws. 

In a space which has been largely encumbered by a lack of regulation and oversight, it appears that ASIC is starting to do more to take stewardship, as the key regulator, and prevent and deter unlicensed conduct and the misleading promotion of crypto-asset financial products.

For more information please contact HopgoodGanim’s Digital Assets team.