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Regulation through enforcement often yields suboptimal outcomes for all stakeholders, including consumers, as it creates a negative stigma around industry companies,” asserted the co-founder of an Australian crypto startup. The co-founder expressed optimism that the Australian Securities and Investments Commission’s recent court setback would encourage Parliament to establish a regulatory framework for the Aussie crypto industry.
Regulators Must Differentiate Between Bad Actors and Those Acting in Good Faith
Regulation through enforcement actions often yields the worst outcomes, not only for regulators but also for users, as it creates a negative stigma around industry companies, Charlie Karaboga, co-founder of the Australian crypto startup Block Earner, has argued. Karaboga emphasized that while regulators are obligated to protect consumers and investors, they must differentiate between malicious actors and good-faith innovators when carrying out their mandate.
The remarks by Karaboga were made just days after an Australian Federal judge ruled against imposing a financial service law penalty on Block Earner. As Bitcoin.com News recently reported, Judge Ian Jackman concluded that the crypto startup, having acted “honestly and not carelessly,” should not be penalized with the AUD 350,000 fine sought by the Australian Securities and Investments Commission (ASIC).
Furthermore, the court criticized ASIC for issuing a press release with a misleading headline. Court documents revealed that the release suggested Block Earner was still breaching financial service laws, leading several media outlets to report inaccurately on the February 9 judgment. Block Earner claimed that the erroneous press statement title saw some of its business prospects go up in smoke.
Therefore, in addition to relieving Block Earner of the penalty obligation, the Australian judge ruled that the ASIC should cover the crypto startup’s legal costs incurred after the court’s Feb. 9 judgment. This favorable judgment thus reduced the financial burden on Block Earner, whose operations were negatively impacted by the ASIC’s misleading press release.
Australian Judge Commends Block Earner’s Conduct
Reacting to the court ruling, Karaboga cautioned that while the outcome is quite positive for Block Earner, the damage has already been done. He added that the mere fact the regulator decided to take Block Earner to court has caused problems for the startup. However, Karaboga expressed gratitude for the judge’s comments regarding Block Earner’s conduct during the ASIC’s investigation.
“That sentence [of comments by the Australian Federal judge] was everything for me, because I don’t need to repeat myself in every single conversation with our partners,” the Block Earner co-founder said.
Meanwhile, Karaboga told Bitcoin.com News that stakeholders in Australia’s cryptocurrency market are hopeful the court’s decision not to penalize Block Earner will encourage the ASIC to adopt a less aggressive stance. Similarly, stakeholders anticipate that ASIC’s setback will prompt the Australian Parliament to establish “clear rules for everyone, allowing us to legitimately operate businesses here.”
Karaboga noted that Australia is making steady progress in regulating the cryptocurrency sector, with the consultation phase now concluded. He anticipates the first draft bill will be circulated in the last quarter of 2024 or the first quarter of 2025, should Parliament decide to expedite the process.
However, he warned that without progress and clear regulations, Australian cryptocurrency market participants will be limited to selling tokens only.
“So we can’t throw the utility of these assets or digital currencies or the blockchain technology without a clear regulation, because anything that we do as an attempt creates this type of friction between us and the regulator,” Karaboga said.
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