Australian DeFi faces “nuanced ramifications” as a result of the Block Earner case

The Australian cryptocurrency sector as a whole might have “nuanced ramifications” as a result of a recent federal court ruling concerning Block Earner’s Earner and Access products.

Product claims of controlled yield will need a financial services license, according to an Australian federal court’s verdict on crypto-yield products. However, “pass-through” decentralized-finance (DeFi) products are exempt from this requirement.

The “Earner” product that Block Earner offered in 2022—which offered yield for loans denominated in USD Coin and PAX Gold (PAXG)—was penalized by federal judge Darren Jackson in an order from February 9th. The judge explained that Block Earner needed an Australian Financial Services License (AFSL) to offer this product.

But Jackson didn’t include Block Earner’s DeFi “Access” product in the same category because, as he said, it wasn’t part of a managed investment scheme and, so, didn’t need an AFSL.

The verdict of the court has complex consequences for Block Earner and the Australian cryptocurrency market as a whole, the company said on February 9.

The Australian Securities and Investments Commission (ASIC) initiated the legal action, claiming that Block Earner’s Earner product and Access were in violation of company laws.

Cointelegraph interviewed Michael Bacina, a digital asset lawyer at Piper Alderman, who stated that Access was only a gateway to DeFi.

In his statement, Bacina clarified that the Earner product implied that customers’ cryptocurrency would generate a return, but in reality, users would only get a certain amount of interest. In contrast, he went on to say that Access is “absolutely dependent on Aave or Compound” and is not at all reliant on Block Earner’s profitability.

According to Bacina, the marketing of these items is the most crucial aspect to investigate. “The lesson for crypto companies in Australia is the significance of well-coordinated marketing and accurate product descriptions.” From March 17, 2022, until November 16, of the same year, the Earner product was operational.

Cointelegraph was able to confirm with Block Earner that the company had already discontinued the Earner product before the proceedings began and that the results would have no impact on Block Earner’s other offerings.

“The rejection of ASIC’s lawsuit against Access is a major milestone in illustrating how DeFi can coexist with Australia’s regulatory frameworks, clearing the path for future development and acceptance of DeFi solutions,” said Block Earner in a statement.

According to Aaron Lane, a senior research fellow at the Blockchain Innovation Hub at the Royal Melbourne Institute of Technology, Block Earner might be subject to licensing requirements under the Australian Treasury’s planned crypto sector legislation when it becomes law.

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