Exclusive: Australian cryptocurrency exchange Swyftx announced the closure of its Earn product over the Christmas long weekend. This follows a spate of similar products being shut down just weeks prior by Finder Earn and Block Earner after legal action was taken by the Australian Securities and Investments Commission (ASIC).
Swyftx was first launched in 2019 by IT experts, Angus Goldman and Alex Harper. The pair first met the University of Sydney’s National Computer Science School camp 2012 and were then housemates in Brisbane years later before launching the crypto exchange.
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 somewhat similar to traditional bonds, but with a far more frequent interest payout which tends to be daily. The rate is dependent on the APY (or Annual Percentage Yield) of each asset, which was generally between four and 10%, though some were higher.
But just eight months after the launch, Swyftx is shutting off this feature on January 10. It notified customers of this on December 27, a public holiday.
“We wanted to inform you that due to the constantly changing regulatory landscape, we have made the decision to close the Earn program on 10 January 2023. While we believe in the value and potential of cryptocurrency, what we currently need is greater clarity on the regulation of crypto offerings such as Earn,” the email read.
“This is not a financially driven decision and we are not removing the program due to any losses or issues with customer assets.”
Swyftx’s website went on to clarify: “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.”
Just one hour later a second email went out, stating the company was also updating its Risk Disclosure Statement and Terms of Use, which will also be coming into effect on January 10.
“Considering the current uncertainty in the crypto world, we have tried to make sure that our Statement & Terms call out risks even more clearly for our customers as well as provide greater clarity around how we hold assets,” the email read.
In the weeks leading up to Swyftx’s announcement, two other Australian crypto players got into hot water with ASIC. The regulator has brought legal proceedings against both companies, alleging that their ‘earn’ products were operating as unlicensed financial services.
Speaking exclusively to SmartCompany, Swyftx confirmed it is shuttering Earn due to recent regulatory movements in the space.
“Swyftx has closed its Earn offering. We hope to reopen it once we have settled rules in place in Australia around interest yielding crypto offerings. In the meantime, our priority is to continue to positively engage with regulators and the government to protect existing and future Aussie crypto users,” a Swyftx spokesperson said.
In a follow-up email, the company further clarified that the shuttering of Earn was proactive and not due to regulatory legal action.
“We’ve proactively removed the offering in response to recent regulatory pronouncements. We take compliance extremely seriously.”
This serious stance is understandable when Swyftx Earn is incredibly similar to other products ASIC has recently targeted.
Finder Earn was launched in November 2021. Its version had users exchange Australian dollars for the stablecoin TrueAUD (TAUD), which was then held by Finder.
Stablecoins being a digital asset that is linked directly to the fiat currency it is representing. Users generally received a 4.01% APY on the investment, which was also paid out daily.
However, at one point this was temporarily bumped to 6.01% for users with holdings over $10,000.
ASIC began civil penalty proceedings against Finder Wallet Pty Ltd on December 15, alleging it was operating without an Australian Financial Services Licence (AFSL).
It 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. A spokesperson for Finder Earn told SmartCompany that the company is refuting the debenture claims.
ASIC also alleges Finder Earn was operated as a debenture, a type of financial product requiring disclosure with the regulator and the issuance of a target market declaration, both of which the company allegedly failed to provide.
Block Earner had a similar story. It launched several “Earner” products in 2021, such as USD Earner, Gold Earner and Crypto Earner. Again, users transferred their fiat currency onto the platform which was converted to digital assets and in this case loaned to decentralised borrowing platforms. It also compounded interest daily at around 4-7%.
On November 15, 2021, ASIC sued Block Earner, alleging its Earner products were operating as unlicensed financial services.
For now, it seems that Swyftx isn’t being pursued legally by the corporate watchdog. But it may still have an eye on the business.
“It’s not our place to discuss or speculate on the reasons behind Swyftx’s decision to cease offering its Earn product,” an ASIC spokesperson said in an email to SmartCompany.
“While we can’t comment on specific cases, ASIC does monitor the market, and may engage directly with firms that we believe are offering crypto-backed products that fall within our regulatory remit to ensure they comply with financial services laws.
This news comes after a string of losses for the crypto platform during the continued market downturn. Just six days before the closure of Earn was announced, it was revealed that Swyftx’s $1.5 billion merger with share trading platform Superhero was getting canned.
And earlier in November it laid off roughly 40% of its staff off the back of the FTX collapse that rocked the crypto world.
Disclosure: the author has a Swyftx account and is a former employee of Finder.
Senior Technology Journalist
A multi-award-winning journalist, Tegan has been reporting on technology, telecommunications and gaming for the past 10 years. She regularly appears on mainstream media channels as an expert tech commentator. Her previous roles include editor of Gizmodo Australia and global reviews editor at Finder. She has also served as a reporter and editor across Business Insider, Lifehacker and Kotaku Australia. Tegan was the co-host of one of the top technology podcasts in Australia, Queens of the Drone Age. You can find her on Twitter @Tegan_Writes.
