ASIC takes firm to court over promotion of crypto-asset

ASIC has commenced civil penalty proceedings in the Federal Court against Queensland-based firm, BPS Financial over the promotion of a crypto-asset.

According to the regulator’s allegations, BPS made false, misleading or deceptive representations and engaged in unlicensed conduct in relation to a non-cash payment facility involving the crypto-asset token called ‘Qoin’.

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.

These Qoin tokens were then promoted by BPS to retail consumer and business owners as a means of making payment for goods and services offered by ‘Qoin Merchants’.

“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,” said ASIC deputy chair Sarah Court.

“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.”

In marketing the Qoin Facility, ASIC alleged that BPS made false, misleading or deceptive representations that it and/or the Qoin Facility were compliant with financial services laws and that the Qoin Facility and/or the Qoin wallet application were regulated, registered and/or approved in Australia.

Moreover, BPS allegedly told consumers who had purchased Qoin tokens that they could be confident and they would be able to exchange them for other crypto-assets or fiat currency (such as Australian dollars) through independent exchanges. Additionally, consumers were told that Qoin tokens could be used to purchase goods and services from an increasing number of merchants registered with BPS.

“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,” said Ms Court.

“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 said that it is seeking declarations, pecuniary penalties, injunctions and adverse publicity orders from the court. The date for the first case management hearing has yet to be scheduled.

Earlier this year, the regulator raised concerns about the number of people investing in “unregulated, volatile” crypto-asset products after finding they now rank as the second most popular investment product with Australian investors.

Jon Bragg

Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.