Judicial warning for unlicensed crypto conduct

Material regulatory reforms relevant to digital assets and payments are expected in 2026 (including INFO 225, DAP/TCP, payments licensing reforms and VASP changes).

Businesses should maintain up-to-date product/service assessments and access appropriate external capability to support those assessments.

A January Federal Court decision demonstrates that the courts are willing to make an example of cryptoasset service providers who engage in reckless conduct and do not obtain adequate independent legal advice.

Australian Securities and Investments Commission v BPS Financial Pty Ltd (Penalty) [2026] FCA 18 (ASIC v BPS) underscores that the penalties imposed may be severe; so much so that they effectively force a provider into liquidation, even where that entity acted honestly and without intent to derive an unfair benefit.¹

Background

In 2024, the Federal Court found that BPS Financial Pty Ltd (BPS) dealt in a financial product and provided financial advice without holding an Australian Financial Services License (AFSL).²  The product, called the 'Qoin Wallet', enabled users to make non-cash payments using 'Qoin Tokens' (Qoin). The Federal Court also found that BPS made false and misleading representations with respect to the characteristics, benefits or uses of the Qoin Wallet. The false/misleading representations were made across multiple periods of varying length between 2020-2023. They include:

• Qoin could be exchanged for fiat currency through independent exchanges;  
• Qoin could be exchanged for other crypto assets through independent exchanges;
• Qoin could be used to purchase goods and services from Qoin merchants;
• Qoin Wallet was an officially registered/approved product.³

ASIC appealed to the Full Federal Court in 2025, arguing that BPS dealt in a financial product and provided financial advice for an additional 10-month period during 2020-2021, without holding an AFSL. The Court upheld ASIC's appeal.⁴

Facts

This Federal Court judgment is about the quantum of any penalty to be levied on BPS. The decision can be separated into three sub-categories:

1. Whether BPS is entitled to be relieved from liability under s 1317S of the Corporations Act 2001 (Cth) (Corporations Act);
2. Where BPS Financial is not entitled to relief, what is the quantum of the penalty to be levied on BPS for its operations without an AFSL?; and
3. What is the quantum of the penalty to be levied on BPS for its false and misleading representations?  

The judgment identifies that much of BPS's misconduct is attributable to issues arising from the intermediary authorisation and Corporate Authorised Representative Arrangements (Arrangements) which it entered.⁵  The Arrangements were necessary to allow BPS to operate while it waited for ASIC to process its AFSL.⁶  Importantly, when it entered into those Arrangements, BPS relied on the advice of the AFSL holder and that entity's own legal representatives.⁷

Analysis

To determine whether BPS was entitled to be relieved under s 1317S, the Court examined the following elements:

• whether BPS acted honestly; and
• whether it ought fairly to be excused in all the circumstances.⁸

Downes J was satisfied that BPS acted honestly, stating "there is no evidence of deceit or conscious impropriety, nor intent to gain an improper benefit or advantage".⁹

However, the judge found that BPS ought fairly not to be excused due to the following considerations:¹⁰

1. BPS assumed that it was compliant with the Corporations Act because it entered into the Arrangements.¹¹  However, the Arrangements did not authorise BPS to operate its Qoin products with the degree of autonomy it in fact exercised.¹²
2. In circumstances where BPS knew that it was prohibited from conducting its intended business without an AFSL, it was unreasonable for BPS not to obtain independent legal advice about the substance of the Arrangements relating to an ASFL exemption.¹³  The fact that BPS paid the AFSL holder's solicitors $38,500 to draft the Arrangements was not a relevant consideration, as that legal advice did not address the substance of the Arrangements.¹⁴

BPS's consultations and attempted consultations with ASIC were a consideration that weighed in BPS's favour but did not outweigh the above considerations.

ASIC v BPS can be contrasted with the penalty judgment Australian Securities and Investments Commission v Web3 Ventures Pty Ltd (Penalty) [2024] FCA 578, which also involved an unlicensed cryptoasset provider. In this case, the cryptoasset provider, Block Earner, was found to have "conducted itself with sufficient care by obtaining advice" from an independent law firm.¹⁵  The attainment of independent legal advice was crucial to Block Earner's successful application for relief from liability to pecuniary penalty under s 1317S.¹⁶  This case is now on appeal.

Judgment

The judgment can be split into two parts.

1. The quantum of any penalty for the unlicensed conduct
2. The quantum of any penalty for the misleading conduct

Quantum of penalty for unlicensed conduct

The Court explored a range of factors, including: the nature and extent of the contravention/damage, past conduct, capacity to pay, intent, compliance systems, seniority of individuals responsible for the breach, extent of any remedial steps taken, profit derived and cooperation with ASIC.¹⁷

The Court stated that BPS's attempts to cooperate with ASIC, as well as its lack of intention, were mitigating factors.¹⁸  However, the Court's "primary purpose" was to deter "contravening conduct" in the cryptocurrency industry by ensuring that contraveners would not partake in the "cynical calculation involved in weighing up the risk of penalty against the profits to be made from contravention".¹⁹  

A penalty of $2 million was imposed on BPS in relation to the unlicensed conduct matter.²⁰  The penalty was levied in spite of the evidence that a large pecuniary penalty would likely result in BPS's bankruptcy.²¹  

Quantum of penalty for misleading conduct

The Court referred to the same factors as above. It accepted that though BPS's representations were not made deliberately or with subjective recklessness, they were "actuated by objective recklessness".²²  The potential damage of the representations, and the aim of ensuring that the penalty has a general deterrent effect, led the Court to impose a cumulative pecuniary penalty of $12 million.²³    

Implications

The Court sought to demonstrate that a contravener would be penalised especially where it treats a contravention as a "cost of doing business".²⁴  It asserted that in an uncertain regulatory environment, it is "not reasonable to fail" to obtain independent legal advice.²⁵  Relying on a counterparty's legal representation to draft an agreement, without having the representation to understand that agreement, will not prevent a contravention or protect against pecuniary penalty. Most significantly, the Court stated that mitigating considerations "must yield to the quantum of penalty required to achieve deterrence".²⁶  

Notably, the orders were made despite the fact that it was conceded that it would force BPS into insolvency.²⁷  The case reflects the seriousness with which courts and the Regulator expect entities to comply with financial services regulation.

The outcome of Australian Securities and Investments Commission v BPS Financial Pty Ltd (Penalty) [2026] FCA 18 aligns with ASIC's 2026 enforcement agenda. Over the November 2024-2025 period, ASIC filed nearly twice as many court actions as in the previous year.²⁸  It aims to accelerate the number of investigations it brings throughout 2026.²⁹  According to Deputy Chair Sarah Court, deterrence is a key component of ASIC's enforcement plan.³⁰

ASIC Chair Joe Longo has stated that compliance with digital asset law is "not simply a box ticking exercise".³¹  The expectation is that providers exercise a high degree of proactivity and a strong "culture of compliance" to ensure they stay up to date with a fast-changing regulatory environment. Treasury's proposed new digital asset platform/tokenised custody platform legislation is the latest milestone in a string of complex changes to the financial services sector. And according to Longo, where users do not stay up to date with the changes, ASIC "will not hesitate to act" to uphold its own "strong [culture of] enforcement".³²  

Practical takeaways

There is a material amount of regulatory change in 2026 – INFO 225, DAP/TCP, Payments Licensing Reforms and VASP changes. Digital asset organisations should aim to keep current their product/service assessments, and test their external advisers' capabilities. The hawkish judicial and regulatory backdrop to this case makes it a high priority.

If you would like to discuss how cases like Australian Securities and Investments Commission v BPS Financial Pty Ltd (Penalty) [2026] FCA 18 may affect your operations, please contact our Financial Services team.

Other links

• DAP/TCP Reforms: https://www.tglaw.com.au/insights/practically-unpacking-treasurys-proposed-digital-assets-legislation
• Payment Reforms: https://www.tglaw.com.au/insights/treasury-releases-draft-legislation-for-the-regulation-of-payment-service-providers
• Reverse Solicitation: https://www.tglaw.com.au/insights/reversing-into-a-regulator---reverse-solicitation-pitfalls

‍Authors

Liam Hennessy | Partner | +61 7 3338 7562 | lhennessy@tglaw.com.au

Julian Farrar | Summer Clerk

¹ Australian Securities and Investments Commission v BPS Financial Pty Ltd (Penalty) [2026] FCA 18 ('ASIC v BPS') 8 [34].

² Australian Securities and Investments Commission v BPS Financial Pty Ltd [2024] FCA 457; ASIC v BPS (n 1) 1 [2], 2 [6].

³ ASIC v BPS (n 1) 2-3 [7].

⁴ Australian Securities and Investments Commission v BPS Financial Pty Ltd (2025) 309 FCR 542 (Collier, Markovic and Shariff JJ).

⁵ ASIC v BPS (n 1) 6 [20]-[21], 9-12 [41]-[49].

⁶ ASIC v BPS (n 1) 6 [20]-[21]; Corporations Act 2001 (Cth) s 911A(2)(b).

⁷ ASIC v BPS (n1) 9-10 [42].

⁸ ASIC v BPS (n 1) 5 [15]. See Australian Securities and Investments Commission v Healey (No 2) (2011) 196 FCR 430 at[86], [94] (Middleton J) for s 1317S factors.

⁹ ASIC v BPS (n 1) 8 [34].

¹⁰ The above considerations consolidate several considerations from the case.

¹¹ Ibid 11 [47].

¹² Ibid 10 [45]-[48].

¹³ Ibid 11-12 [47]-[48], 13 [56].

¹⁴ Ibid 11-12 [47]-[48].

¹⁵ Australian Securities and Investments Commission vWeb3 Ventures Pty Ltd (Penalty) [2024] FCA 578, 20 [60], 21 [62].

¹⁶ Ibid 20-21 [60]-[62], 26 [81].

¹⁷ ASIC v BPS (n 1) 19-26 [85]-[124].

¹⁸ Ibid 27 [125].

¹⁹ Ibid 21-22 [98]-[99], 26-27 [122]-[125]. The Court quoted Singtel Optus Pty Ltd v Australian Competition and Consumer Commission (2012) 287 ALR 249 at [62]-[63] (Keane CJ, Finn and Gilmour JJ).

²⁰ ASIC v BPS (n 1) 27 [125]-[126].

²¹ Ibid 21 [96].

²² Ibid 31-32 [143]-[144].

²³ Ibid 31-32 [143]-[144], 34-35 [157]-[160].

²⁴ Ibid 21 [97], 26 [122]-[124].

²⁵ Ibid 13 [56].

²⁶ Ibid 34 [157].

²⁷ Ibid 21 [96], 22 [99].

²⁸ Australian Securities and Investments Commission, 'MIU- Issue 173 - November 2025', About ASIC (Web Page, November 2025)<https://www.asic.gov.au/about-asic/corporate-publications/newsletters/market-integrity-update/miu-issue-173-november-2025/#:~:text=Major%20cases%20and%20outcomes,to%20an%20ASIC%20criminal%20investigation.>.

²⁹ Ibid.

³⁰ Sarah Court, 'The power and purpose of enforcement'(Speech, ASIC, 13 November 2025) <https://www.asic.gov.au/about-asic/news-centre/speeches/the-power-and-purpose-of-enforcement/>.

³¹ Joe Longo, 'Crypto-assets: The case for strong regulation and enforcement' (Speech, ASIC, 16 October 2023)<https://www.asic.gov.au/about-asic/news-centre/speeches/crypto-assets-the-case-for-strong-regulation-and-enforcement/>.

³² Ibid.