Federal Court Sides With Crypto Lender in Clash With ASIC
The Federal Court of Australia has sided with crypto lender Block Earner, ruling that fixed-yield crypto loans qualify as standard lending products and do not meet the criteria of a collective investment scheme.
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The Federal Court of Australia has ruled in favor of crypto lending firm Block Earner, finding that its fixed-yield product, Earner, does not qualify as a financial instrument under existing regulations.
The Earner product enabled users to supply their digital assets in exchange for a fixed return. The court determined that this arrangement constitutes a loan rather than an investment service. Therefore, Block Earner does not require a financial services license to operate.
The court based its decision on several key factors:
- Clients had no entitlement to the company’s profits
- Returns were not tied to the company’s financial performance
- Customer funds were not pooled into a collective investment structure
- Returns were paid strictly at a predetermined fixed rate
Consequently, the product did not qualify as a managed investment scheme or a financial service under Australian law.
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Previously, the Australian Securities and Investments Commission (ASIC) claimed that Block Earner was operating without a license and pursued legal action to impose a penalty. However, the court dismissed the appeal and ordered the agency to cover all legal costs, including those from the initial proceedings.
The ruling sets an important legal precedent. For the first time, a federal court has affirmed that a crypto company can offer a digital asset-based product without a license, as long as the product does not have the characteristics of an investment offering.
Ultimately, this decision could have a lasting impact on crypto lending regulation in Australia.
Why the Ruling Matters for Australia's Crypto Market
The court officially recognized crypto lending as separate from investment products. It drew a clear distinction: if a user provides funds at a fixed interest rate and the return does not depend on the company’s performance, the product is not considered an investment and does not require a financial license.
Read more: Crypto lending: Top 5 services
As a result, this decision creates new opportunities for fintech companies working with fixed-yield crypto lending. As a result, these products can now be developed within the existing legal framework, without needing to be repackaged as traditional financial services.
Companies now have greater legal clarity, especially in a regulatory environment where Australia has yet to establish unified rules for the crypto sector.
Although Block Earner does not plan to reintroduce its Earner product, this legal win strengthens the overall position of the crypto industry. It demonstrates that digital assets can be integrated into the existing legal system without regulatory overreach or unnecessary pressure. For the broader market, this ruling sends a strong message. Innovation remains possible, even in a strict jurisdiction, as long as the product is properly structured.
Related: Australia Launches Crypto Regulation Framework for Sector Clarity
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