Originally published on: August 23, 2024
Australia’s financial regulator, ASIC, has emerged victorious in a legal battle against Bit Trade, the operator of Kraken’s cryptocurrency exchange in Australia. The Federal Court of Australia ruled in favor of ASIC, citing violations related to design and distribution obligations and unlicensed credit facility operations.
Violation of Financial Regulations Uncovered
The court’s decision stemmed from Bit Trade’s failure to adhere to design and distribution obligations, which are necessary to offer financial products in Australia. These obligations mandate firms to tailor products to meet the specific needs of customers and distribute them through a targeted strategy. ASIC argued that Bit Trade’s margin trading product was launched without a designated target market, leading to non-compliance with legal standards.
Additionally, ASIC contended that Bit Trade’s product, which allowed customers to receive up to five times the value of their collateral as credit, constituted operating as an unauthorized credit facility, contravening relevant regulations.
Consequences and Next Steps
Following the ruling, Bit Trade and ASIC have been given seven days to agree on declarations and injunctions. ASIC intends to pursue financial penalties against Bit Trade. Deputy Chair of ASIC, Sarah Court, emphasized the importance of regulatory compliance within the crypto industry. She stressed the need for financial products to be distributed to consumers in a manner that aligns with regulatory mandates.
Kraken’s Perspective and Advocacy
In response to the court’s decision, a Kraken spokesperson expressed disappointment but readiness to comply with the ruling. Kraken highlighted the complexities of applying existing regulatory frameworks to innovative technologies and advocated for clearer legal guidance in the crypto space in Australia to benefit investors.
Backstory and Acquisition
Kraken, a US-based cryptocurrency exchange, acquired Bit Trade, Australia’s oldest crypto exchange in 2020, gaining a license to operate in the country. The legal battle between Bit Trade and ASIC underscores the evolving regulatory landscape of the crypto industry in Australia.
This development serves as a significant reminder for companies operating in the crypto space to prioritize compliance with regulatory obligations, ensuring consumer protection and adhering to legal standards.
