Australian digital asset operators brace for stiffer controls as BPS Financial faces lawsuit

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The Australian Securities and Investments Commission (ASIC) has instituted legal proceedings against BPS Financial for allegedly making untrue statements about its Qoin token.

The securities regulator brought the action against BPS Financial in federal court for making “false, misleading or deceptive representations” that adversely impacted its 79,000 users. BPS Financial launched Qoin in October 2019, claiming that the tokens can be used to buy goods and services from merchants on the BPS platform.

Other claims by the company about Qoin were that the facility was in compliance with financial service laws and that users could exchange the tokens for other virtual currencies or Australian dollars. However, ASIC claims that BPS failed to keep its end of the bargaining, which prompted the suit against the company.

“We allege that, despite what BPS represented in its marketing, Qoin merchant numbers have been declining and that there have been periods of time where it was not possible to exchange Qoin tokens through independent exchanges,” ASIC Deputy Chair Sarah Court said. She added that the operation of Qoin was not in compliance with financial services laws.

ASIC urges the court to issue declarative reliefs, pecuniary penalties, and necessary injunctions for the benefit of affected parties to the suit. BPS has firmly stated that it is not in breach of any financial service laws and stated on its website that it would challenge the matter to its logical conclusion.

“Before it started, BPS consulted with ASIC in late 2019 regarding the structure of the Qoin project and did so again in early 2021,” according to the post. “BPS will keep the community updated as it is able to.”

Warning shots for all operators

Digital asset operators in the country have been warned to brace themselves for a renewed crackdown by ASIC. It appears that the legal action against BPS Financial is only a preemptive strike, with the regulator noting that policing the promotion of virtual assets is a “key priority” for the securities watchdog.

“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,” said Court.

“Crypto-assets are highly volatile, inherently risky, and complex,” notes ASIC. In August, the head of the institution voiced concerns over the alarming number of investors in shady virtual currencies. He urged other regulators to act in concert to protect investors from falling victim to dark digital asset projects.

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