A recent decision from Australia’s highest court reinforces a clear message to the crypto industry both across the Tasman and here in New Zealand: digital asset products can be caught by existing financial services legislation, and this could result in adverse outcomes for those behind the products if the law is not complied with. Any platforms operating in New Zealand that offer returns on digital assets, or those businesses considering launching similar products, should be carefully assessing their regulatory position.
The outcome
The High Court of Australia has allowed an appeal by the Australian regulator, the Australian Securities and Investments Commission (ASIC), overturning the Full Federal Court. It found that a fixed-yield digital asset product called ‘Earner’ offered by Web3 Ventures Pty Limited (Block Earner) was a ‘financial product’ for the purposes of Australia’s primary piece of financial services legislation – Corporations Act 2001 (Cth)[1], and that Block Earner required a financial services licence (AFSL) to do so – which it did not have.
In what some had called a landmark decision from 22 April 2025, the Full Federal Court had found that the ‘Earner’ product was not a ‘financial product’ under the Corporations Act – concluding that it was neither a financial investment facility, a managed investment scheme nor a derivative. As a result, Block Earner was relieved from any pecuniary penalty. But, following the High Court’s finding of contraventions, that position may now change as the proceeding has been remitted back to the Full Federal Court to determine ASIC’s appeal on penalty.
For ASIC, the decision reinforces its enforcement approach in the crypto sector and strengthens the footing of its regulatory guidance which had received criticism following the Federal Court decision.
Background
Block Earner operated an online platform through a website and mobile phone application. Between 17 March 2022 and 16 November 2022, Block Earner issued the ‘Earner’ product where platform users invested in the ‘Earner’ product through the platform and transferred fiat currency (AUD) to a bank account operated by Block Earner. The user then nominated an amount to be invested in an eligible cryptocurrency, where Block Earner converted the nominated amount to cryptocurrency. The user received a fixed rate of return of seven per cent annual percentage yield (APY) on and paid in the relevant cryptocurrency (or four per cent APY in some cases).[2]
Block Earner ‘on-lent’ cryptocurrency – acquired using funds deposited by users – together with other cryptocurrency, to make profits for itself through margin lending and returns for the user (being the APY).[3] Notably, Block Earner did not hold or have the benefit of an AFSL for the ‘Earner’ product.
ASIC subsequently brought proceedings against Block Earner arguing that the ‘Earner’ product was a ‘financial product’ under the Corporations Act and that Block Earner therefore required an AFSL to offer it. As noted above, the Federal Court found in favour of Block Earner.
The High Court’s reasoning
The High Court unanimously allowed the appeal brought by ASIC on two grounds, that the ‘Earner’ product was a financial product under the Corporations Act:
- as it was a facility through which users made a ‘financial investment’ within the meaning of section 763B of the Corporations Act; and
- because it was a ‘derivative’ under section 761D of the Corporations Act.[4]
Financial Investment
On the first ground, ASIC was required to establish that a financial investment existed under section 763B of the Corporations Act. Section 763B of the Corporations Act sets out that a person makes a financial investment if the investor gives money or money’s worth to another person, and that other person uses, or intends to use, the contribution to generate a financial return, or other benefit, for the investor (even if no return or benefit is in fact generated), and the investor does not have day-to-day control over how the contribution is used to generate the return or benefit.
The High Court accepted ASIC’s contention that the ‘Earner’ product was a facility because users ‘gave’ AUD to Block Earner (not cryptocurrency) which was used (and was intended to be used) to generate a return for the users (the APY). Labels were looked past by the Court to consider the actual arrangements at play.[5]
In doing so, the High Court rejected Block Earner’s argument that there needed to be a ‘nexus’ between the contribution made by the investor and the return generated by the issuer – i.e., that users needed some ‘skin in the game’ in downstream activities.[6] The High Court found this argument to be inconsistent with the plain language of section 763B of the Corporations Act and that there is nothing in that section which suggests that there must be the ‘nexus’, as claimed. The contribution given to Block Earner (in AUD) by the users was used to generate a return.
Derivative
On the second ground, the High Court found that the ‘Earner’ product was a derivative within the meaning of section 761D of the Corporations Act.
The High Court accepted ASIC’s argument that the amount of AUD returned to users varied by reference to the eligible cryptocurrency and exchange rates. It held that the currency ‘exchange service’ was part of the ‘Earner’ product and was not a distinct arrangement.[7]
Block Earner submitted that the ‘Earner’ product was not a derivative because it fit within an exclusion to the definition of derivative under the Corporations Act. However, the High Court rejected this argument through looking at the ‘substance’ of the arrangement over its ‘form’.[8]
Implications of the Block Earner decision to New Zealand businesses
For New Zealand businesses operating in the crypto-space, a key takeaway from the Block Earner decision is that, internationally, existing legislation is being used to deem products or offerings involving cryptoassets as constituting financial products rather than waiting for bespoke crypto-specific legislation to be enacted. New Zealand’s primary legislation which deals with, and defines, ‘financial products’ is the Financial Markets Conduct Act 2013 (FMC Act).
In New Zealand, generally speaking, most cryptocurrencies are considered to be a form of personal property. They are often not, by virtue of being a cryptocurrency alone, ‘financial products’ for the purposes of the FMC Act. In the Block Earner decision, the nature of the overall arrangement was considered when ascertaining as to what constituted the financial product – not the cryptocurrency on its own.
Even where a cryptoasset itself is not a ‘financial product’, a business dealing in digital assets could still be caught as providing ‘financial services’ under New Zealand law. The Financial Service Providers (Registration and Dispute Resolution) Act 2008 (FSP Act) provides that any person who provides a ‘financial service’ in New Zealand must be registered on the Financial Service Providers Register. The definition of ‘financial service’ is broad. For example, a crypto exchange issuing its own cryptoassets to facilitate trading could fall within the financial services category of ‘issuing and managing the means of payment’. A cryptoasset wallet provider storing cryptoassets or money on behalf of others, which facilitates exchanges of cryptoassets or between money and cryptoassets, could fall within the category of ‘operating a value transfer service’. For further detail on how New Zealand’s financial services regulatory framework can apply to blockchain and cryptoassets, see Lane Neave’s chapter in the Blockchain & Crypto-Assets 2026 – New Zealand (Chambers and Partners Global Practice Guide).
It is also worth noting that the definitions of ‘financial product’ and ‘derivative’ under New Zealand law differ from their Australian counterparts. Generally speaking, Australia takes a ‘facility’ approach when considering whether there is a ‘financial product’ – defining a financial product as a ‘facility’ through which a person makes financial investment, manages financial risk, or makes non-cash payments.
Whereas, in New Zealand, we take a ‘category’ approach as financial product is defined with reference to four categories at section 7 of the FMC Act – ‘equity security’, ‘debt security’, ‘managed investment product’ and ‘derivative’’. In New Zealand, our analysis generally looks to whether a product fits within one of these four categories. That said, the New Zealand definition of ‘derivative’ has similarities to Australia’s. Both require that the amount payable varies by reference to something else, although the differences in exclusions and the interaction with other categories could lead to different outcomes on similar facts. For further detail on the ‘financial products’ definitions in a crypto-specific context, see section 2.2 of Lane Neave’s chapter in the Blockchain & Crypto-Assets 2026 – New Zealand (Chambers and Partners Global Practice Guide).
In New Zealand, the Financial Markets Authority holds statutory powers under the FMC Act to declare, by notice, that a particular product or class of products is, or is not, a financial product for the purposes of the FMC Act. In doing so it can consider the economic substance of the relevant product(s) in question. The Financial Markets Conduct (ECDD Holdings Limited Stablecoin) Designation Notice 2026 (NZDD Designation Notice) was issued in March 2026 to declare the NZDD stablecoin as not being a financial product for the purposes of the FMC Act.
This shows us that there has been movement in local waters, as to what sorts of crypto products could (and could not) constitute financial products. It is important to note, however, that the Designation Notice was only issued in relation to the NZDD stablecoin – it does not provide a broad designation for other crypto products or arrangements.
The Block Earner decision highlights that acquiring the required licences, registrations, and compliance with financial services legislation is important. In New Zealand, like Australia, there are significant penalties (civil and criminal) set out in a range of financial services regulation. This shows that the ‘stakes are high’ with respect to compliance. Whether a cryptoasset, or an offering tied to it constitutes a financial product or financial service is a technical question, and as this decision shows, it requires careful analysis. Market participants should not assume that something is not a financial product – they should seek advice on this issue. In appropriate cases, businesses may also wish to engage proactively with the regulator.
Messaging from the Financial Markets Authority, New Zealand’s financial markets regulator, that they are ‘technology-neutral’ and ‘pro-innovation’ also illustrates that the substance of arrangements, as was done in the Block Earner decision, could be considered when ascertaining whether statutory financial products and services definitions are satisfied.
New Zealand businesses operating in the crypto space should not disregard the Australian Block Earner decision and should instead consider the themes that may cross waves into New Zealand waters. Although our courts are not bound to follow the Block Earner decision, it could carry significant persuasive weight to a New Zealand court which is presented with a similar set of facts where the definitions set out in New Zealand’s financial services regulations (such as the FMC Act) are analysed.
Conclusions
Given the complexities in the regulatory treatment of financial products and services involving cryptoassets, New Zealand businesses should consider whether their existing or planned crypto products may constitute ‘financial products’ or ‘financial services’ under the FMC Act and FSP Act and seek proactive legal advice before launching or continuing to offer such products.
Lane Neave’s Web3 & Digital Assets law experts understand the expanding ubiquity and importance of Web3 and blockchain assets, platforms and protocols, throughout the global financial and commercial landscape. We would be happy to provide New Zealand legal advice to businesses operating in this space.
Disclaimer
This information is for general information purposes only. It does not, nor is it intended to, constitute legal, financial, accounting, tax or other professional advice, and should not be relied upon as such. This information is subject to change without notice. All liability is disclaimed.
To learn more about how to navigate the ecosystem of digital technology and commerce, visit this page of our website or contact the authors of this article.
[1] Australian Securities and Investments Commission v Web3 Ventures Pty Ltd [2026] HCA 21 at [10].
[2] At [3].
[3] At [47].
[4] At [10].
[5] At [43] – [47].
[6] At [53].
[7] At [68] – [69].
[8] At [73].
