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Block Earner CEO calls for licensing clarity after being sued for crypto products

The CEO of fintech firm Block Earner has spoken out about the “lack of clarity” in Australia’s financial licensing regime after his company was sued by the country’s financial services regulator for providing unlicensed crypto-based investment products.

The Australian Securities and Investments Commission (ASIC) announced on November 23 local time that it had commenced civil proceedings against the company for offering three crypto-linked fixed income products without an Australian Financial Services (AFS) licence.

ASIC said the products should have been licensed as they were “managed investment schemes” where investors contribute money that is pooled for an interest in the scheme.

The products, called “Crypto Earner,” “USD Earner,” and “Gold Earner,” offered returns by users depositing Australian dollars that would be converted to Bitcoin (BTC), Ether (ETH), USD Coin (USDC), or PAX Gold ( PAXG) depending on the product according to Block Earner’s website.

The crypto-assets are then lent to borrowers on Decentralized Finance (DeFi) protocols Aave (AAVE) and Compound Finance (COMP) to generate returns for the product.

ASIC deputy chairperson Sarah Court expressed concern that Block Earner offered the products without “appropriate registration” or an AFS license which she claimed “left consumers without important protections,” adding:

“Just because a product hinges on a crypto-asset doesn’t mean it falls outside financial services legislation.”

In an email statement to Cointelegraph Block Earner CEO and co-founder Charlie Karaboga said that while the firm “[understands] the background” it was a “disappointing outcome.”

He said it welcomed regulations and claimed the firm had “spent significant resources building regulatory infrastructure” to be able to offer services “under existing guidelines provided by ASIC.”

Related: FTX Australia’s license suspended as 30,000 Aussies fail

Karaboga took aim at the unclear regulatory environment for crypto in the country, saying the “lack of clarity […] creates friction between regulators and innovators,” adding:

“In an ideal world, we would build these products in a regulatory sandbox with more clarity on licensing regimes. In the future, we look forward to working with ASIC and other regulators in this space.

According to Karaboga, Block Earner has applied for a credit license and informed ASIC that it will apply for an AFS license for its upcoming products as “the licensing requirements are clear.”

ASIC has previously issued a warning to crypto asset providers in the country after taking action against the creators of the Qoin token.

It said its “key priority” is targeting “unlicensed behavior and misleading promotion of crypto-asset financial products” after it claimed the Qoin token creators were “misleading” its users.

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