In brief
- The Full Federal Court of Australia ruled that Block Earner’s crypto lending product was a fixed-term loan arrangement, not a financial product.
- An appeal from the regulator ASIC to impose penalties on Block Earner was dismissed.
- The decision sets a precedent for regulating crypto under existing Australian financial laws.
The Full Federal Court of Australia ruled in favor of crypto lender Block Earner on Tuesday, overturning previous findings that its discontinued "Earner" product constituted a regulated financial product requiring licensing.
An appeal from the Australian Securities and Investments Commission (ASIC) to impose penalties on Block Earner was dismissed, with the regulator ordered to pay full legal costs, including those incurred from the original trial.
With the ruling, the court has completely overturned all previous findings that the company violated financial laws. In a press statement, the ASIC said that it is "considering this decision."
The regulator did not immediately return Decrypt's request for comments.
The Block Earner case
The case, which began in November 2022, had been closely watched across Australia's fintech sector as a test of how existing financial services laws apply to blockchainblockchain-based products.
The decision could influence how digital asset products are regulated in the future for Australia—where, according to Block Earner, approximately four million residents have some form of crypto exposure.
"From the outset, we sought to ensure that our modern product suite could fit into a less-modern regulatory environment," Charlie Karaboga, CEO and co-founder of Block Earner, said in a statement shared with Decrypt.
In its ruling, the Court found Block Earner's product didn't meet the definition of a managed investment scheme or financial investment facility under the Corporations Act.
Block Earner "used the money or money's worth given to it by the investors to generate a financial return or other benefit for the investors, by generating revenue from which it would be able to pay the fixed yield which it was legally obliged to pay," a copy of the judgment reviewed by Decrypt reads.
The Court determined that customers simply loaned crypto under fixed terms for interest returns, with no pooling of contributions to generate benefits for members.
Australia Unveils New Crypto Regulations, Pledges Action on Debanking
The Australian government, under Prime Minister Anthony Albanese, has outlined a new regulatory framework for digital assets, aiming to provide greater certainty for industry participants while addressing risks tied to consumer protection and market integrity. The reforms will require major crypto platforms to obtain an Australian Financial Services Licence while exempting smaller-scale firms and businesses not involved in financial services. Treasury's Statement on Developing an Innovative Aus...
Critical to the Court's decision was the finding that customers had no exposure to Block Earner's business performance outside of the agreed interest rate, and that contractual terms framed the product as a loan, not an investment.
"The more we treat crypto assets like existing asset classes, the easier it will be for businesses to innovate," James Coombes, chief commercial officer at Block Earner, told Decrypt in an emailed statement.
Block Earner voluntarily discontinued the Earner product when ASIC initiated proceedings in 2022.
Representatives from the company confirmed to Decrypt that they have "no plans to reopen" the product, despite the favorable ruling.
