Australian cryptocurrency exchange Swyftx announced the closure of its Earn product over the Christmas weekend citing a “constantly changing regulatory landscape” for crypto products in the country. The decision follows a broader trend of similar products being shut down such as Finder.com's Finder Earn product, and fintech firm Block Earner after legal action was taken by the Australian Securities and Investments Commission (ASIC).
Swyftx’s Earn offering was first launched in May 2022 and it enabled users to earn daily interest on specific cryptocurrencies and stablecoins by loaning them to Swyftx. The model is akin to traditional bonds, but with a far more frequent interest payout which tends to be daily. The rate is dependent on the APY (Annual Percentage Yield) of each asset, which was generally between four and 10%, though some were higher.
Swyftx’s website stipulated:
“Under the Earn program, Swyftx generates yield by staking assets on-chain from Swyftx-held wallets. As such, no customer funds loaned to Swyftx are at risk to third parties.”
The website post also included a piece about government regulation.
“We are committed to working with regulators and the government to create a clear and stable regulatory environment for cryptocurrency in Australia, and we hope to be able to re-open the Earn program once these rules are established.”
Swyftx says the removal of Earn is proactive
ASIC has been progressively cracking down on Australian crypto product providers in recent months. In addition to the actions against Block Earner and Finder.com in November and December, ASIC also took action against the founders of the Qoin token in October last year for “misleading” representations of its token. Further, the Australian federal government has also stepped up efforts to regulate the crypto sector.
In December 2022, the Australian Labor Government announced it would release a consultation paper in early 2023 as part of its token mapping initiative.
Australian Treasurer Jim Chalmers said the consultation paper would cover how certain crypto assets should be regulated alongside frameworks for company licensing, asset custody and consumer protections.
Civil Penalty Proceedings against Finder Wallet Pty Ltd.
ASIC began civil penalty proceedings against Finder Wallet Pty Ltd on 15 December 2022, alleging it was operating without an Australian Financial Services Licence (AFSL).
ASIC is also alleging that Finder Earn was operating as a debenture which requires disclosure and a target market declaration to the regulator which it says weren’t provided.
Block Earner was in a similar situation. It launched several “Earner” products in 2021, such as USD Earner, Gold Earner and Crypto Earner. Users transferred their fiat currency onto the platform which was then converted to digital assets and in this case loaned to decentralised borrowing platforms. It also compounded interest daily at around 4-7%. On 15 November 2021, ASIC sued Block Earner, alleging its Earner products were operating as unlicensed financial services.
Currently, it seems Swyftx isn’t being pursued legally by ASIC. But given the recent suits by the corporate watchdog, it appears Swyftx is erring on the side of caution.
Comments