April 19, 2024
Bitcoin News

Australian Fintech Seeks Crypto Clarity Amid Bitcoin-Backed Loan Launch

Australian fintech firm Block Earner is forging ahead with its plans to introduce a crypto-backed loans product, despite facing an upcoming court date with financial regulators over allegations of offering financial products without the necessary license.

This new crypto loan offering enables Australian crypto investors to utilize their cryptocurrency holdings as collateral to secure cash loans. Similarly, SALT, a lending platform based in Colorado, extends crypto-backed loans to clients in the United States. Earlier this year, major cryptocurrency exchange Coinbase provided a similar service to its U.S. customers but later discontinued it in May.

The initial release of Block Earner’s crypto loan product is anticipated at the end of September, initially supporting loans backed by Bitcoin as collateral.

Charlie Karaboga, co-founder of Block Earner, informed Cointelegraph that these new loan products have been carefully designed to align with existing licensing models in a conservative manner.

Karaboga’s firm encountered legal issues last November when it was sued by the Australian Securities and Investments Commission for allegedly offering crypto-linked fixed-yield earning products without holding an Australian Financial Services (AFS) license.

At that time, Karaboga criticized the regulator for its lack of clarity, asserting that his firm had invested significant time and resources into developing products he believed complied with ASIC’s existing guidelines.

“Our stance remains unchanged. There is a lack of clear regulation in Australia,” Karaboga added. “Like any fintech company, we sought legal opinions before launching the product. We believe there was insufficient regulation or licenses for us to apply for.”

However, Charlie noted that the regulatory actions against Block Earner and rival crypto firm Finder were largely reactive, likely triggered by the collapse of FTX in November.

“We were impacted, likely because our product was more visible compared to others, as they were using it as an ancillary product, while we were offering it as a core product,” he explained.

Despite remaining unaffected by the FTX fallout, Karaboga decided to discontinue the company’s “earn” products and reimbursed all users in response to ASIC’s legal action.

The company seems to have learned from its past experience. James Coombes, the head of business at Block Earner, stated that the new launch would not face the same fate as their Earn product since it already complies with the rules governing Australian credit licenses.

“There is a fundamental difference,” Coombes explained. “With the Earn product, there was uncertainty about whether a license was required, and that’s why we had differing opinions. However, in this case, the clear guidance is that a license is necessary to offer consumer credit, so we obtained the license.”

Hopes for Regulatory Clarity
Looking ahead, Karaboga expressed optimism that quicker regulatory advancements in jurisdictions like Singapore, Hong Kong, and the United Kingdom would compel the Australian government to catch up, or else risk losing its share of the crypto enterprise market.

“I expect that within the next 12 to 18 months, we’ll witness more regulatory clarity,” Karaboga stated. He explained that because Australia boasts one of the highest per-capita GDPs and its citizens were early adopters in the crypto industry, they have become attractive targets for scammers.

Ultimately, Karaboga asserted that domestic regulators are strongly supportive of crypto and are eager to encourage innovation in the sector. This viewpoint was shared by Binance Australia General Manager Ben Rose, who recently expressed confidence that Australian regulators would favor crypto in the long term.

As of September 6, Coinbase listed Australia as one of its primary expansion locations outside the U.S.

Block Earner’s Federal Court hearing is scheduled for November of this year, with a decision expected by January.

Photo by Karolina Grabowska

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