The Australian Securities and Investments Commission (ASIC) has succeeded in its appeal before the Full Federal Court in ASIC v BPS Financial Pty Ltd [2025] FCAFC 74 (30 May 2025).

Previously, ASIC primarily argued before the Primary Judge of the Federal Court with a focus (broadly described), that the act of issuing a financial product is inconsistent with acting as an authorised representative of another Australian Financial Services Licence (AFSL) holder in relation to that financial product. A point that was left open for further analysis by the Full Federal Court as being not decisive on the circumstances here. This appeal came down to the facts.

This frame of analysis would cause the Primary Judgment to be contained within the scope of reasoning that the AFSL holder in question here, PNI Financial Services Pty Ltd (PNI), by holding its own AFSL authorisation to give general financial product advice and deal (including issue) in a non-cash payment system, allowed it to authorise BPS to provide those same financial services and same financial product in question - being the Qoin Wallet, under an authorised representative agreement granted by PNI, but which could ultimately be seen to have amounted to a practice described below as “AFSL Provisioning”.

The Full Federal Court stated that the Primary Judge did not examine whether BPS by its conduct in offering the Qoin Wallet was in fact conducting this business within the scope of its authorised representative agreement - that is, as representative of PNI (broadly, this issue being often a consequence of such AFSL Provisioning). That is, this appeal came down to the facts.

The author of this article, through a brief general and AI assisted search, could not find information on the non-cash payment system financial products that PNI itself operated, let alone in the distributed ledger cryptocurrency space. 

Presumably PNI did not. The Full Federal Court stated, it is plain that, other than appointing BPS as its authorised representative, PNI had little to do with the issue of the Qoin NCP Product (i.e. the Qoin Wallet - not the Qoin Blockchain, this distinction is discussed further below). 

This ultimately meant that BPS was not on the facts of its issuance of the Qoin Wallet acting as a representative of PNI - it was therefore acting on its own outside of the authorised representative arrangement with PNI and that was unlicensed.

By way of summary, the Full Federal Court gave the following key reasons for its decision:

• First, BPS had developed the Qoin NCP Product well before it had any dealings with PNI. PNI had no involvement in its development. 

• Second, BPS first issued the Qoin NCP Product purportedly as an authorised representative of a separate AFSL holder called Billzy Pty Ltd (Billzy) (PNI had no involvement until later on). The Primary Judge concluded that BPS was not exempt from holding an AFSL under its earlier authorised representative arrangement with Billzy, such that BPS had issued the Qoin NCP Product and gave financial product advice without holding an AFSL.

• Third, BPS sought out AFSL holders for what could be “bluntly put” to be, “AFSL provisioning” (this point was central to the overall decision): 

“The expression “AFSL provisioning” refers to a practice whereby the issuer of a financial product seeks out an AFSL holder to avoid the need to obtain an AFSL licence for itself. Irrespective of its lawfulness, the factual question raised by such a practice is whether the relevant financial service provided by the authorised representative is, as a result, provided in that person’s capacity as an authorised representative of the relevant AFSL holder.”

• Fourth, all of the relevant documents relating to the issue of the Qoin NCP Product – including the White Paper, the Qoin Guide, the Combined FSG/PDS and the Terms of Use – were prepared and issued by BPS well before any of its dealings with PNI. The documents were the product of BPS’ work and referred to the fact of the relevant facilities and services being made available by BPS. And the Terms of Use did not refer to PNI or any other AFSL holder. 

Some of these points could lead to later analysis where an authorised representative is forced to seek a replacement AFSL holder where the original AFSL holder has restructured its business and terminated the financial services authorisation. 

But it is the helpful analysis of the nature of a decentralised cryptocurrency from a financial services regulatory and legal perspective which is of particular interest, which starts from reading the Primary Judgment.

Helpful Analysis in Primary Judgment

The Primary Judgment ASIC v BPS Financial Pty Ltd [2024] FCA 457 (3 May 2024) provides helpful analysis of a distributed ledger cryptocurrency in the financial product context. The relevant points of analysis can be summarised as follows.

A Qoin can be described as a cryptocurrency that is given personal ownership functionality through the use of a decentralised ledger showing all validated transactions and ownership of Qoin linked to each identified user (i.e. by their private key and password). 

Note the Qoin distributed ledger blockchain is not distributed among all users but between seven different nodes each owned by a different entity in a different country, which work together, through self executing smart contract rules, to ensure all transactions on the Qoin blockchain are validated efficiently.

The Qoin Wallet App was designed and owned by BPS. It is the financial product here, not the Qoin blockchain infrastructure. The Qoin Wallet was customised from a crypto-wallet product supplied by a company called AlphaWallet. 

The Qoin Wallet used an Application Programming Interface (API) gateway to send requests to, and receive responses from, the seven Qoin Blockchain Nodes - this is how the user could initiate transactions in Qoin using their Qoin Wallet once their identity was verified.  

“Each new Qoin Wallet created by the user generates a new public/private key pair. The public key is the unique Qoin Wallet address, which becomes the identifier for the user’s newly created Qoin Wallet, which is the equivalent of an account number and BSB for a traditional bank account, [but which also serves an additional security function for cryptography purposes]. A public key typically comprises of string of letters and numbers. The private key acts, in effect, as a secure digital password, stored on the user’s mobile device, which can be used to authorise (or “sign”) transactions using the Qoin Wallet.” 

What was the financial product here?

The Primary Judge used the analogy of a system which facilitates direct debits of a deposit account whether drawn from a deposit account by a merchant account facilitated by the same financial institution, and a merchant account facilitated by another, separate financial institution. Her Honour stated:

“Contrary to ASIC’s submissions, the Qoin Blockchain, a means of acquiring Qoin and a means whereby business operators who hold Qoin Wallets can register as Qoin Merchants are not components of, and are not themselves, the mechanism which allows the user to make the non-cash payment. One cannot “deal” in these aspects of the system, which may be contrasted against the ability to issue Qoin Wallets. 

[...]

The financial product is no more than the direct debit facility; the systems with which it is integrated, and in relation to which it functions, are separate. To include those systems, which include aspects controlled by third party financial institutions, cannot be intended when one has regard to the statutory purpose of Chapter 7. 

[...]

As submitted by BPS, because other systems, or aspects of them, are required for non-cash payments to be made does not mean those systems are encapsulated in the financial product. The same approach applies when considering the Qoin Wallet and the associated components of the Qoin [Blockchain] Facility.

For these reasons, the Qoin NCP Product (and the financial product within the meaning of s 763A of the Corporations Act) is the Qoin Wallet alone.

The Primary Judge found that the non-cash payment facility financial product was not the Qoin blockchain but rather the Qoin Wallet which transacted on the Qoin blockchain by communicating through the API.

Before the Full Federal Court, “[t]here was no dispute that the Qoin NCP Product was a financial product.”