04-366 ASIC acts to shut down electronic currency trading websites
Tuesday 9 November 2004
The Australian Securities and Investments Commission (ASIC) has acted to shut down a number of electronic currency exchange businesses that operate on the internet.
Following an examination of electronic currency trading websites, ASIC became aware of three Australian-based businesses that were operating such sites or were acting as agents for similar businesses based overseas. These businesses exchanged conventional currencies to electronic currencies and vice-versa, and charged a commission for their services. These businesses do not hold an Australian financial services (AFSL).
The Executive Director of Enforcement, Ms Jan Redfern said that consumers needed to be discerning about the financial products available on the internet while cautioning local businesses to be careful about dealing in unregulated overseas based financial products.
‘If a business isn’t properly registered with an AFSL then consumers can’t be sure about the quality of the product or advice they are receiving. Remember, offering financial advice or products without a licence is illegal’, Ms Redfern said.
The companies, Stevens I.T. Pty Ltd, Sydney Gold Sales Pty Ltd and Fountainhead Management Pty Ltd, which acted as an Australian agent, cooperated with ASIC throughout its investigation. They all withdrew the websites and closed down their businesses voluntarily.
The websites involved were:
Ms Redfern said it was important that the operators of new and emerging financial practices and products were familiar with their legal responsibilities.
‘Local businesses need to be aware that there are licensing rules that they must adhere to. Businesses should be careful to check what the law allows and avoid becoming involved with financial products issued by unregulated offshore providers.’
‘Consumers must also be wary of the financial products and advice they obtain via the internet. While ASIC will continue to carry out surveillance checks on financial products and operators and, where appropriate, take action, consumers should remember that people offering financial products and advice over the internet are also required to be licensed and operate under the same laws’, Ms Redfern said.
Electronic currencies, or e-currencies, are privately issued currencies that are used to trade goods and services on the internet. The issuers of these electronic currencies are based offshore. The most common of these currencies is e-gold which is issued by e-gold Inc, based in the small West Indies country of Nevis. Other electronic currencies include e-bullion, pecunix, GoldMoney, EVOCash and WebMoney.
ASIC believes that such products can be defined as non-cash payment systems and that people who deal in such products with Australian consumers must hold an Australian financial services licence (AFSL).