ASIC has commenced civil penalty proceedings in the Federal Court against BPS Financial Pty Ltd (BPS) for allegedly making false, misleading or deceptive representations and engaging in unlicensed conduct in relation to a non-cash payment facility involving a crypto-asset token called Qoin (the Qoin Facility).
ASIC 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.
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.’
ASIC is seeking declarations, pecuniary penalties, injunctions and adverse publicity orders from the Court.
The date for the first case management hearing is yet to be scheduled by the Court.
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Background
ASIC alleges that 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 (termed ‘Qoin Merchants’) 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.
Entities providing services in relation to crypto-asset-related products should be aware that some such products may be financial products such as non-cash payment facilities. 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.
ASIC’s Moneysmart website has information for consumers about the risks of investing in crypto-assets.
Editor's note:
The matter has been scheduled for the first case management hearing on Monday 5 December 2022.
Editor's note 2:
A further case management hearing has been listed for 28 February 2023. A trial has been set for 31 July 2023.
Editor's note 3:
The case management hearing scheduled for 28 February 2023 has been vacated. A 5-day trial is now scheduled to commence on 16 October 2023.
Editor's note 4:
A further case management hearing has been scheduled for 31 March 2023.
Editor's note 5:
The case management hearing scheduled for 31 March 2023 has been rescheduled for 20 April 2023.
Editor's note 6:
On 13 April 2023, this media release was updated with a Statement of Claim document.
Editor's note 7:
A further case management hearing has been listed for 28 July 2023.
Editor's note 8:
ASIC has now filed its amended statement of claim in the matter. Download the statement of claim.
Editor's note 9:
The trial in this matter was held on 16-19 October 2023. Judgement has been reserved.