In Australian Securities and Investments Commission v BPS Financial Pty Ltd [2024] FCA 457 the Federal Court found BPS Financial Pty Ltd (BPS) contravened the Corporations Act as it did not hold an Australian Financial Services Licence, nor was authorised by a licence holder, to issue or provide financial advice about the Qoin Wallet.

In or about January 2020, BPS Financial Pty Ltd developed and made available to the public a system for making non-cash payments using a digital currency or crypto-asset which it named Qoin.

The Australian Securities and Investments Commission (ASIC) alleged that BPS unlawfully carried on a financial services business without holding an Australian Financial Services Licence (AFSL) and that, in the course of that business, it made false and misleading representations in connection with the supply or use of a financial product, being Qoin.

Justice Downes found BPS engaged in misleading or deceptive conduct and made false or misleading representations concerning the Qoin Wallet, including that:

• the Qoin Wallet was officially registered or officially approved when it was not,
• the Qoin Wallet could be used to purchase goods and services from an increasing number of Qoin merchants, when in fact it was declining, and
• consumers who purchased Qoin tokens could be confident that they would be able to exchange them for other crypto-assets, or currency such as Australian dollars, through independent exchanges.

In identifying the “financial product” Justice Downes concluded that “the relevant “financial product” in this case is the arrangement between BPS and each user which allows the user to make non-cash payments upon the issue of the Qoin Wallet….the Qoin NCP Product (and the financial product within the meaning of s 763A of the Corporations Act) is the Qoin Wallet alone.”

With respect to licensing, BPS was not licensed and although BPS was the authorised representative at different times of financial services licensees it was not authorised to issue the Qoin NCP Product, and it did not provide advice about that product as the agent of licensees.

UPDATE: ASIC has appealed part of the judgment in this matter on grounds including that: 

• Her Honour erred in holding that BPS was exempt under s 911A(2)(a) of the Corporations Act from the requirement to hold an Australian Financial Services Licence (AFSL) because it had an Authorised Representative Agreement with PNI Financial Services Pty Ltd; and 
• Her Honour erred in holding that an authorisation, for the purposes of s 916A, can authorise a person (in this instance BPS) to issue, on behalf of an AFSL holder, a financial product of which the AFSL holder is not the issuer. 

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Author: David Jacobson
Principal, Bright Corporate Law
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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.