Australian Regulator Triumphs in Landmark Crypto Non-Cash Payment Case: A New Era for Bitcoin (BTC) Regulations?

• The Australian Securities and Investment Commission (ASIC) has won its first case involving cryptocurrencies against BPS Financial Pty Ltd (BPS).
• The case involved the “Qoin scheme” which earned $26 million in sales.
• The Australian Federal Court ruled that BPS was guilty of most of the charges leveled by ASIC.

ASIC wins a landmark case against BPS Financial Pty Ltd involving the “Qoin scheme”, marking a significant ruling in the crypto industry.

ASIC’s First Victory in Crypto Case

The Australian Securities and Investment Commission (ASIC) has won its first case involving cryptocurrencies. The case was against BPS Financial Pty Ltd (BPS), a company that allegedly engaged in misleading advertising and unlicensed operations with a non-cash payment facility involving a crypto asset token. The “Qoin scheme” included the Qoin tokens, the Qoin Wallet, and a distributed digital ledger implemented by blockchain technology.

The “Qoin Scheme”

The “Qoin scheme” was established by BPS in 2020 and included the Qoin tokens, the Qoin Wallet, and a distributed digital ledger. The tokens were promoted to retail consumers and business owners as a payment method for goods and services offered by Qoin Merchants. However, the tokens could only be traded on the BTX Exchange, a company under BPS. The crypto exchange only allowed trading Qoin tokens for Australian dollars, and over time, it allegedly imposed restrictions that limited the ability to exchange the token.

Court Rules in Favor of ASIC

On May 3, 2024, the Australian Federal Court ruled that BPS was guilty of most of the charges leveled by ASIC. The court found that BPS engaged in unlicensed conduct when offering the ‘Qoin Wallet,’ a non-cash payment facility which used a crypto-asset token. The court also found that BPS broke the Corporations Act for at least 10 months in 2020 as it did not hold an Australian Financial Services License. As a result, the company was not authorized to issue or provide advice about the Qoin Wallet.

Misleading Marketing and Representation

The court also found that BPS engaged in misleading marketing and representation of the product. The company made false claims that the Qoin Wallet was officially registered and that it could be used to purchase goods and services from an increasing number of Qoin Merchants when the number was actually declining. The court also found that the only crypto exchange that accepted Qoin before November 2021 was the BTX exchange, contradicting the claims that Qoin tokens could be traded for other crypto assets or AUD from different exchanges.

Conclusion

This ruling marks a significant development in the crypto industry, as it is the first court outcome against a non-cash payment facility involving crypto. However, the court did not agree with all of ASIC’s arguments against BPS. The court disagreed with the regulator’s claim that the Qoin Wallet and the Qoin Blockchain were one single scheme as part of the Qoin Facility. This ruling becomes a crucial one against the regulator’s attempt to classify blockchain technology as a financial product under Australian law.