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Regulation by enforcement continues in Australia as Finder Wallet prosecuted

Dall-e 2 is making fingers creepy

The Australian Securities and Investments Commission (ASIC) has commenced civil penalty proceedings in the Federal Court of Australia against Finder Wallet. The subsidiary is alleged to have provided unlicensed financial services, breaching product disclosure requirements and failing to comply with design and distribution obligations in connection with the Finder Earn product.

Before its rapid sunsetting last month, which Finder said was due to interest rate changes but which ASIC says occurred after they contacted Finder about the Earn product, users were able to transfer cash, purchase True AUD stablecoins and be paid a fixed return for giving Finder the use of the stablecoins. Customers were paid in AUD on a compounding return of either 4.01% or in some cases 6.01% with a nifty little second by second counter showing the interest clocking up.

ASIC has been busy, having commenced proceedings against Block Earner last month. In the announcement by ASIC, Deputy Chair Sarah Court acknowledged ASIC's recent activity:

This is ASIC's third recent action against a firm offering a crypto-asset related product that we consider to be a financial product. Our message to industry is clear - just because an offer involves a crypto-asset related product does not guarantee it will fall outside the current regulatory regime.

ASIC alleges that the product offered by Finder Wallet is a debenture because customers deposit money with the understanding their money would ultimately be repaid, this is a marked difference from the allegation made in relation to Block Earner by ASIC.

The definition of a debenture under the Corporations Act is technical and requires the contribution of money to occur, so if the matter is defended the status of crypto-assets and whether the involvement of a crypto-asset in this product prevents the definition of a debenture being met will be closely watched.

This prosecution continues ASIC's approach of regulation by enforcement of crypto-asset products and comes only a day after the current government announced consultation on crypto-product licensing. Such actions will unfortunately impact Australia's reputation as a jurisdiction supporting innovation, and increase the risk to start-ups bringing forward innovative products, and see more projects leave for jurisdictions which have greater certainty.


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