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An Australian Federal Court handed the crypto industry a major victory in a “landmark” judgment on Thursday.
The court dismissed a case brought on by Australia’s market regulator against Finder Wallet in Dec. 2022. The case alleged that its Finder Earn product offering was a debenture and, as a result, it violated the Corporations Act by carrying on a financial services business without holding an Australian Financial Services Licence (AFSL).
The court found that The Australian Securities and Investment Commission (ASIC) did “not establish that the Finder Earn product is a debenture” and ordered it to pay the defendant’s costs.
“A landmark case such as this highlights how important it is for policymakers and regulators to work with industry to provide real guidance and clarity to avoid the wasted time and costs inherent in regulation by enforcement,” said Blockchain Australia Chair and Digital Assets Lawyer Michael Bacina.
Finder stopped offering its Earn product in November 2022, within days of the FTX meltdown and a month before it was sued. The ASIC has 28 days to appeal the ruling.
“Currently, we are not planning to bring it back, but never say never,” said a Finder spokesperson to CoinDesk. “When we sunset the product in November of 2022, it was because it was no longer competitive in a world of higher interest rates.”
This was the first case in which an Australian authority considered a crypto asset as a debenture and only the second case the ASIC brought against a crypto-related entity seeking to prosecute yield products.
An Australian court had given a split decision in the case against Sydney-based crypto startup Block Earner in February 2024. The court found that Block Earner engaged in unlicensed financial services conduct when offering its crypto-backed Earner product but dismissed allegations relating to Block Earner’s DeFi “Access” service.
“ASIC pursued this matter because we considered that this product was being offered without the appropriate license or authorization and therefore without the benefit of important consumer protections,” said ASIC Executive Director Enforcement and Compliance Tim Mullaly.
Australia’s Treasury has announced that it expects to release draft legislation that covers licensing and custody rules for crypto asset providers by 2024, and once the legislation becomes law, exchanges will have 12 months to transition to the new regime.