Australia’s financial regulator has issued a stark warning to Australian crypto asset providers amid launching civil proceedings against Australian firm BPS Financial Pty Ltd (BPS) over “misleading” representations concerning its Qoin token.
In an Oct. 25 announcement, the Australian Securities and Investments Commission (ASIC) said it has commenced civil penalty proceedings against BPS Financial for making “false, misleading or deceptive representations” to its 79,000 users about its token Qoin.
It alleges the company engaged in “unlicensed conduct” relating to Qoin, a digital currency launched in Oct. 2019 which allows participating merchants to accept as payment for goods and services.
ASIC Deputy Chair Sarah Court said this case should serve as a warning to all crypto issuers that ASIC is monitoring the crypto market for misconduct.
“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.”
She further explained its crucially important that consumers and investors are “provided with honest and accurate information” because, “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.”
Court said they were particularly concerned over BPS Financial’s alleged misrepresentation that the Qoin Facility is regulated in Australia, and that the token can be used to purchase goods and services from an increasing number of merchants registered with BPS.
“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.”
BPS has denied wrongdoing in an Oct. 25 statement on the Qoin website, saying they disagree with “ASIC’s position” and “will be defending the matter.”
“Before it started, BPS consulted with ASIC in late 2019 regarding the structure of the Qoi project and did so again in early 2021. BPS will keep the community updated as it is able to.”
BPS Financial Director Tony Wiese told Cointelegraph the company has followed the law to the best of their ability.
"From the beginning, we took the necessary steps to seek guidance from professionals and the regulators for appropriate licensing in a mostly unregulated environment."
Wiese is also calling on the Federal Government to complete their token mapping and crypto regulations "sooner than later," so there is a consistent framework to follow.
"This will help all start-ups to focus on innovation and growing their projects rather than considerable costs and resources on legal proceedings."
ASIC is seeking declarations, pecuniary penalties, injunctions and adverse publicity orders from the Court, but the date for the first case management hearing has not been scheduled.
The Australian regulator has ramped up scrutiny over the crypto sector over the last few months. In August, ASIC chief Joe Longo raised the alarm over the number of people that invested in “unregulated, volatile” crypto assets during the COVID-19 crisis.
At the time, he said considering there are “limited protections” for investors, the lack of understanding among retail investors makes “a strong case for regulating crypto-assets to better protect investors.”
The corporate regulator isn’t the first to pursue legal action against BPS.
In late 2021, Queensland-based law firm Salerno Law accused BPS of engaging in misleading and deceptive conduct and sought damages on behalf of merchants, investors and holders who allegedly suffered losses after acquiring the Qoin utility token.
According to the ABC, legal proceedings were stayed on Oct. 5 when class action applicants were asked to pay a $750,000 security for Court costs as a condition of continuing their claim.
Wiese said BPS brought a dismissal application to the Court on Oct. 7 when the class action did not provide the $750,000 for security costs.
Updated Oct. 27 with comments from BPS Financial Director Tony Wiese.
Updated Nov.1 with additional comments about class action from BPS Financial.