A recent federal court decision in Australia has brought “nuanced implications” on the country’s overall crypto stance. The ruling penalized a prominent crypto player, Block Earner, over its Earner product.
It distinguished between crypto-yielding products, stating that products that offer “a managed yield” must be offered under a financial services license. However, decentralized finance (DeFi) products that it tagged “see-through” may not be.
Court Ruling Distinguishes Managed Yield Products
Block Earner is to face penalties over the offering of ‘Earner,’ one of its products, in 2022. Federal Judge Darren Jackson declared the ruling on February 9. Notably, Block Earner’s “Earner” offered yield for loans denominated in various crypto assets.
These include Bitcoin (BTC), USD Coin (USDC), Ether (ETH), and PAX Gold (PAXG).
In the recent ruling, the judge stated that the crypto firm required the Australian Financial Service License (AFSL) for such services. However, the judge didn’t extend the licensing requirement to Block Earner’s DeFi ‘Access’ product.
Rather, he mentioned that the latter does not belong to the group of a managed investment scheme, and so doesn’t need an AFSL. On its part, Block Earner reacted to the court’s decision regarding the crypto regulation using its products as a case study.
The firm stressed that the ruling has laid out the right guidance for the crypto industry in Australia. Also, the company believed that clarity through the law would control how businesses within the industry comply with regulations in the future.
Block Earner stated:
The Court’s decision carries nuanced implications for Block Earner and the broader crypto industry in Australia. The decision provides guidance to the industry as to the applicability of Australian financial services laws to crypto-related products and services.
ASIC Legal Stance And Perspective In The Crypto Industry
The Australian Securities and Investment Commission (ASIC) initiated the case against Block Earner. The regulator alleged that the firm violated corporate laws through the offering of its products, Earner and Access.
However, the court’s decision brought a distinction in product classes that could form a crypto framework in the country.
While making some statements about the ruling, Michael Bacina, attorney for digital asset Piper Alderman, drew some distinctions between the Earner and Access products.
📰 Unpacking insights from the Block Earner v. ASIC Judgment. This hotly awaited decision can highlight danger areas on yield products, but also where products involving DeFi might be outside the regulatory perimeter.🌱https://t.co/xVbPDB9EEs
— Michael Bacina | exgratia.eth | ⚖️ (@MikeBacina) February 9, 2024
He stated:
The Earner product involved a representation that user’s crypto would be used to make a return (but users would only be paid a fixed interest amount),
Meanwhile, the Access product doesn’t rely on Block Earner making a return at all and is “completely dependent on Aave or Compound,
He added.
Also, the lawyer pointed out that the most important aspect to consider in both products is how they’re marketed. He stressed the importance of considering the distinct features of products during the marketing and representations.
On its part, ASIC accepts the court ruling as a positive progress toward protecting users of digital assets.
The Federal Court finds fintech company Block Earner engaged in unlicensed financial services conduct when offering its crypto-backed Earner product https://t.co/TS7Xf8emuf pic.twitter.com/XOrxvZsEft
— ASIC Media (@asicmedia) February 9, 2024
It instructed crypto firms to comply with the rules once their offerings are in the category of financial products. Notably, products under a managed investment scheme require a license before being offered.
According to the report, the regulator is to seek orders from the court regarding the financial penalties against Block Earner.
The proceedings for a case management hearing are set for March 1, 2024.
Share 
Damien Fisher Crypto Journalist 
Question & Answers (0)