ASIC seeks definitive High Court ruling on ‘financial products’

In what will represent an important test case of its reach with respect to crypto, the Australian Securities and Investments Commission (ASIC) is launching a High Court appeal against the Block Earner Full Federal Court decision.

The regulator said it was launching the appeal to obtain the High Court’s ruling on what falls within the definition of “financial product” and to clarify when interest-earning products and products involving a conversion of assets from one form into another are regulated.

In announcing its High Court appeal, ASIC said the definition of “financial product” was drafted in a broad and technology-neutral way which needed to be clarified.

“The clarification is important as it applies to all financial products and services whether they involve crypto-assets or not,” the ASIC statement said.

In the absence of the High Court appeal, the Full Federal Court Block Earner decision stood to substantially constrain the degree to which ASIC deal with particular crypto products.

Initial legal analysis of the Full Federal Court decision described it as a landmark.

ASIC had been assessing whether to launch the appeal since March when it was faced with the Full Federal Court decision which related to the regulator’s February 2024 action against Block Earner which is the trading name of Web3 Ventures Pty Ltd, an AUSTRAC-registered digital currency exchange.

Block Earner, for a period in 2022, offered a fixed-yield product involving crypto assets and a variable yield product.

ASIC alleged that by offering the Earner product, Block Earner was providing financial services without a licence in breach of the Corporations Act.

The Federal Court initially found that Earner was a financial product, but the Full Federal Court later found that it did not constitute a financial product and that therefore there was no need for Block Earner to hold an Australian Financial Services License.