Case note: crypto product not a regulated debenture

In another example of the complexity of financial services regulation, in Australian Securities and Investments Commission v Finder Wallet Pty Ltd [2024] FCA 228 the Federal Court of Australia decided that a cryptocurrency related product was not a “debenture” as defined in section 9 of the Corporations Act which required its issuer to hold an Australian Financial Services Licence.

UPDATE 11 April 2024: ASIC has announced it has appealed the Federal Court decision.

Although Finder Wallet is a digital currency exchange (DCE) provider registered with the Australian Transaction Reports and Analysis Centre through which customers can buy and sell cryptocurrency assets it did not hold an AFSL.

The Finder Earn product had the dual purpose of giving Finder Wallet’s DCE customers the opportunity to sell their cryptocurrency to Finder Wallet and to earn a return. Customers had a right to the return of any money held in their account and which remained unspent.

After examining the mechanics of the Product, Justice Markovic concluded that as there was no money deposited or lent, and there was no undertaking by Finder Wallet to repay any money as a debt, the product was not a debenture.

ASIC has not stated whether it will appeal the decision.

In Australian Securities and Investments Commission v Web3 Ventures Pty Ltd [2024] FCA 64 the Federal Court decided that the Block Earner product was a managed investment scheme which had to be licensed.

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David Jacobson

Author: David Jacobson
Principal, Bright Corporate Law
About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.

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