TLDR
- The Federal Court rules Finder Earn is not a debenture, exempting Finder from needing an Australian Financial Services License.
- ASIC’s appeal against Finder Earn’s classification is dismissed, affecting future stablecoin regulations.
- The court found that TrueAUD is property, not money, and the Finder Earn product doesn’t involve a “money debt.”
- The ruling brings clarity for DeFi products and stablecoin regulations, especially in Australia.
The Federal Court of Appeal has upheld the decision that Finder Earn, a product offered by Finder Wallet, is not a debenture, meaning Finder is not required to hold an Australian Financial Services License (AFSL). This ruling has implications for digital asset providers offering similar products, as it challenges the Australian Securities and Investments Commission’s (ASIC) interpretation of stablecoins as a form of money.
Federal Court Upholds Ruling on Finder Earn
On September 3, the Federal Court of Appeal ruled in favor of Finder Wallet, confirming that its product “Finder Earn” is not a debenture.
This decision dismissed the Australian Securities and Investments Commission’s (ASIC) appeal, which argued that Finder Earn should be classified as a debenture, requiring Finder to hold an Australian Financial Services License (AFSL).
The court found that the product did not involve the “deposit of money” or a “loan” to Finder, as ASIC had claimed. Instead, the transaction was deemed to involve the exchange of intangible property—specifically, the TrueAUD stablecoin—for the right to receive returns.
ASIC’s Arguments and the Court’s Findings
ASIC had initially contended that Finder Earn was a debenture based on two key arguments. First, they claimed that customers were making a “loan or deposit” when they exchanged their funds for TrueAUD. Second, ASIC argued that the collective activities of Finder’s customers under the terms of service should be viewed as a single arrangement where customers lent money to Finder. They also argued that there was an “undertaking to repay” the funds.
The court dismissed both arguments, explaining that purchasing TrueAUD was just one option among others available to customers. Moreover, the court ruled that TrueAUD was a form of property, not money, and thus the arrangement did not involve a “money debt.” The court emphasized that the transaction didn’t involve the traditional dynamics of loaning or depositing money.
Impact of the Ruling on Digital Asset Providers
The ruling has significant implications for digital asset providers in Australia, particularly for those offering products similar to Finder Earn.
The court’s decision clarifies that stablecoins like TrueAUD, which are pegged to fiat currencies but function as property rather than money, do not fall under the legal definition of a debenture.
This decision provides clarity for digital asset providers, offering them some assurance that certain stablecoin-backed products may not require them to hold an AFSL. However, the case also raises ongoing questions about how to define and regulate digital asset products within Australia’s existing financial framework.
