- ASIC released a ruling against Bit Trade Pty for not meeting the legal requirements of its margin trading product.
- The petition claimed margin trading products should have been treated as a credit facility.
Australia’s Federal Court ASIC, delivered a ruling against Bit Trade Pty today. Bit Trade Pty is the operator of the Kraken cryptocurrency exchange in Australia. According to ASIC, Bit Trade failed to meet the legal requirements for its margin trading product.
In September 2023, ASIC initiated legal proceedings against Bit Trade for not properly assessing the market for its margin trading product before offering it to users. This was despite the regulator notifying the company of these concerns earlier.
Sarah Court, ASIC Deputy Chair, emphasized that:
“Today’s outcome sends a salient reminder to the crypto industry about the importance of compliance with the design and distribution obligations.”
Court noted that financial products must be marketed and distributed in a manner that aligns with legal requirements, including making target market determinations before offering them to consumers.
The case highlighted the claim that Bit Trade’s margin trading product should have been treated as a credit facility. According to ASIC the product agreement to repay could be considered a form of “deferred debt”.
In addition, ASIC argued that Bit Trade’s product violated regulations by offering customers credit up to five times the value of their collateral, effectively operating as an unlicensed credit facility.
Kraken responded to the ruling with a statement expressing their disappointment but affirmed their commitment to complying with the court’s decision.
A Kraken spokesperson said,
“Overall, we’re disappointed by today’s ruling, but we’re prepared and willing to comply with the court’s decision.”
Ongoing Regulatory Challenges for Cryptocurrency Exchanges
This ruling comes amid broader scrutiny of cryptocurrency exchanges. In November 2023, the U.S. Securities and Exchange Commission (SEC) also sued Kraken for allegedly operating as an unregistered securities exchange.
However, ASIC and Bit Trade have seven days to negotiate declarations and injunctions related to the case. Following this, ASIC plans to seek financial penalties against Bit Trade. The outcome of these discussions will be closely watched by the crypto industry and regulatory bodies.
Highlighted Crypto News Today:
Can Bitcoin Sustain the Ongoing Brief Bullish Momentum?
