ASIC Sues Kraken’s Australian Subsidiary Over Compliance
- Bit Trade, Kraken’s Australian subsidiary, is facing legal action from ASIC for alleged non-compliance with design and distribution obligations related to its margin trading product.
- The lawsuit highlights ASIC’s commitment to enforcing strict regulatory standards in the cryptocurrency industry and serves as a reminder of the importance of compliance with consumer protection laws.
In a significant development in the world of cryptocurrency, Bit Trade, the Australian subsidiary of the renowned crypto exchange Kraken, finds itself entangled in a legal dispute with the Australian Securities and Investments Commission (ASIC). The regulatory authority has filed a lawsuit against Bit Trade, alleging serious breaches of design and distribution obligations related to one of its trading products.
Margin Trading Product Under Scrutiny
At the heart of this legal battle lies Bit Trade’s margin trading product, which has come under intense scrutiny. ASIC contends that Bit Trade introduced this product to Australian customers without conducting a necessary target market determination, a violation of regulatory guidelines that were enforced in October 2021.
Since its launch, over 1,160 Australian users have reportedly engaged with Bit Trade’s margin trading service, resulting in a collective loss of approximately $8.35 million, or 12.95 million Australian dollars.
Furthermore, despite receiving warnings from ASIC in June 2022 regarding its compliance shortcomings, Bit Trade allegedly continued to offer its product without fulfilling the required determinations. This margin trading product enables clients to obtain credit extensions of up to five times the value of their collateral. ASIC, however, classifies this offering as a “credit facility,” as it provides users with credit for transactions involving specific crypto assets on the Kraken platform.
Kraken’s Australian Branch Responds
Jonathon Miller, who oversees Kraken’s operations in Australia, expressed his surprise at ASIC’s legal action. He believed that the product was in compliance with local regulations, stating, “We have been actively engaging with ASIC to ensure our product offering aligns with compliance standards.” Miller added, “We were both taken aback and disheartened by today’s enforcement action. We firmly believe that our product aligns with Australian regulations and will persist in seeking clarity on this matter.”
ASIC’s Message to the Crypto Sector
Sarah Court, ASIC’s deputy chair, underscored the importance of ASIC’s action as a crucial reminder for the entire cryptocurrency sector. She emphasized that financial products in the crypto space will continue to undergo rigorous scrutiny by regulatory bodies to ensure compliance with Australia’s stringent consumer protection laws. Court stated, “ASIC’s move underscores the significance of adhering to design and distribution mandates to ensure financial products are delivered appropriately to consumers.”
ASIC’s Stance on Cryptocurrency
It’s worth noting that ASIC has consistently maintained a strict position on cryptocurrencies within the country. In a recent case, the regulatory body launched a lawsuit alleging that eToro Aus Capital Ltd. had breached its design and distribution obligations for difference (CFD) products in August. This proactive approach by ASIC demonstrates its commitment to upholding regulatory standards and protecting consumers in the rapidly evolving world of digital assets.