Bit Trade, the provider of the Kraken cryptocurrency exchange in Australia, is facing legal action from the Australian Securities and Investments Commission (ASIC) for allegedly failing to meet design and distribution obligations for one of its trading products.
ASIC, in a statement released on September 21, asserted that Bit Trade did not establish a target market determination before making its margin trading product available to Australian customers.
Design and distribution obligations are mandatory requirements imposed on financial product providers in Australia.
These obligations entail designing financial products that align with the predefined needs of customers and distributing them through a targeted strategy.
ASIC claimed that since the introduction of these obligations in October 2021, over 1,160 Australian customers utilized Bit Trade’s margin trading product, resulting in a collective loss of approximately $8.35 million (12.95 million Australian dollars).
The regulator communicated Bit Trade’s non-compliance with these obligations to the company in June 2022.
Despite this warning, ASIC alleges that Bit Trade continued to offer the product without fulfilling the necessary determinations.
Jonathon Miller, the managing director of Kraken’s Australian operations, expressed surprise at ASIC’s actions, believing the product to be in compliance with local regulations.
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Miller emphasized that they had been actively trying to engage with ASIC to ensure their product offering remained compliant.
Bit Trade’s margin trading product provides customers with a “margin extension” service, enabling them to access credit up to five times the value of their collateralized assets.
ASIC, however, contends that this product qualifies as a “credit facility,” as it extends credit for purchasing and selling specific cryptocurrencies on the Kraken exchange.
Sarah Court, ASIC’s deputy chair, stressed that these legal proceedings serve as a reminder to the cryptocurrency industry that regulators will continue to scrutinize financial products to ensure compliance with consumer protection laws in Australia.
“ASIC’s action should be a reminder of the importance of adhering to design and distribution obligations to ensure appropriate distribution of financial products to consumers,” Court stated.
In summary, ASIC has initiated civil proceedings against Bit Trade, the operator of Kraken in Australia, accusing the company of failing to meet design and distribution obligations related to one of its trading products.
The regulator alleges that Bit Trade did not establish a target market determination and continued to offer the product despite being notified of non-compliance.
Bit Trade contends that its product complies with Australian law, while ASIC emphasizes the importance of compliance with consumer protection laws in the cryptocurrency industry.
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