Australian Securities and Investments Commission v Web3 Ventures Pty Ltd

Earner began with Australian dollars. A customer transferred money to an account in Web3 Ventures' name, nominated a cryptocurrency and selected an amount to invest. Web3 Ventures converted that amount into the nominated cryptocurrency and offered a fixed annual percentage yield.

The customer did not simply hold an asset in a self-managed wallet. Web3 Ventures received the contribution, controlled the product process and promised a return. On withdrawal, the cryptocurrency and yield were converted back into Australian dollars.

The primary judge had found that Earner involved a financial investment. The Full Federal Court disagreed and also held that the product was not a derivative. The High Court unanimously reversed that result.

Customers gave Web3 Ventures money, which the company used to generate the promised yield and profit for itself. The amount payable at the end also depended on the exchange rate between Australian dollars and the chosen cryptocurrency. Those mechanics brought Earner within both statutory definitions.

The Court did not declare that every crypto-related service is a financial product. It classified one product on the agreed and proven facts.

A different business still needs to analyse who controls the assets, whether a customer makes a contribution, what return or benefit is promised, how the amount payable is calculated and which entity performs each part of the service.