ASIC Claims Victory in Qoin Wallet Case

The Australian Securities and Investments Commission (ASIC) recently won its case against BPS Financial Pty Ltd (BPY) over its Qoin Wallet and associated cryptocurrency. BPS marketed Qoin tokens to retail customers and business owners, referred to as ‘Qoin Merchants,’ as a payment method for goods and services provided by those merchants, but Justice Kylie Downes found that BPS breached the Corporations Act by not holding an Australian Financial Services Licence. The ruling also provided an important distinction between the Qoin blockchain and wallets representing a single scheme.

$40 Million Received for Qoin Tokens

BPS promoted Qoin tokens to retail consumers and business owners (‘Qoin Merchants’) as a means of payment for goods and services offered by Qoin Merchants, attracting more than 93,000 users and receiving in excess of $40 million from the sale of Qoin Tokens up to September 2022.

ASIC took legal action against BPS in October 2022, accusing the company of unlicensed conduct and providing false, misleading, or deceptive information about the Qoin Facility, alleging that BPS falsely assured consumers that they could confidently exchange Qoin tokens for other crypto assets or fiat currencies like Australian dollars through independent exchanges.

Additionally, the regulatory body contended that BPS misrepresented the increasing number of merchants accepting Qoin tokens, falsely claimed that the Qoin Facility and wallet application were officially regulated and approved in Australia, and asserted compliance with financial services regulations.

BPS Found Guilty

Justice Downes agreed that the Qoin Wallet was a financial product (specifically, a non-cash payment facility) and concluded that BPS contravened the Corporations Act from January 2020, except for a 10-month interval.

BPS was found to have engaged in deceptive conduct by falsely claiming the Qoin Wallet was officially approved, that it was usable with a growing number of merchants, and that it could be exchanged for other crypto-assets or Australian currency through independent exchanges.

The court highlighted that the only exchange accepting Qoin before November 2021, BTX Exchange, was controlled by BPS and lacked independence.

Ruling Includes Important Blockchain Distinction

Despite ASIC’s claim that the Qoin Blockchain and Qoin Wallets constituted a single scheme, the court rejected this, emphasizing that the Qoin Blockchain and Qoin Wallets did not directly enable non-cash payments. This rejection was noted as a significant distinction for blockchain technology by experts, who acknowledged that while breaches should be prosecuted, the underlying technology remains distinct.

ASIC Chair Joe Longo emphasized the significance of the ruling, noting that it is the first court decision against a crypto-related non-cash payment system:

ASIC has taken various enforcement actions against crypto businesses to clarify regulated products and when a license is required. These proceedings should send a message to the crypto industry that their products will continue to be scrutinized by ASIC to ensure consumers are protected and that they comply with regulatory obligations.

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Responses

  1. It’s fascinating to see ASIC taking a firm stance against unlicensed cryptocurrency operations. The Qoin case serves as a crucial reminder that crypto businesses must adhere to regulatory obligations and obtain the necessary licenses to operate legally.
    I find the court’s distinction between the Qoin blockchain and wallets particularly interesting. It highlights the importance of understanding the underlying technology and its implications in the legal context. While it’s essential to prosecute breaches, it’s equally important to recognize that the blockchain itself remains a distinct entity.
    This ruling sets a significant precedent for the crypto industry in Australia. It sends a clear message that ASIC will continue to scrutinize crypto products to ensure consumer protection and regulatory compliance. As someone who closely follows developments in the crypto space, I appreciate the efforts made by regulatory bodies to create a safer and more transparent environment for users.