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- 1 The Australian Securities and Investments Commission (ASIC) sues Kraken, an Australia-based cryptocurrency exchange.
- 2 Kraken failed to make a trader market determination before the product offering, violating regulations.
A post by ASIC against Kraken Crypto Exchange shocked the crypto space. The post was related to initiating civil proceedings against Bit Trade Pty Ltd, offering Kraken Crypto exchange to Australian customers. The platform is alleged to violate the regulations related to offering margin trading products.
What actually happened? Let’s take a look at the whole scenario.
What’s Wrong With Kraken?
Bit Trade, the provider of Kraken in Australia, is alleged by the ASIC. The regulator, Bit Trade, did not make a target market analysis before offering the margin trading products to the Australian market. Kraken, a crypto exchange offered by Bit Trade, failed to comply with the design and distribution rules for one of its trading products.
If you are operating a financial business in Australia, it is essential for a firm to obey its design and distribution obligations, which is considered a legal requirement. The obligation simply sets requirements for the company to design financial offerings that meet the predetermined requirements of individuals. Development of the financial products and distribution of the same need to be carried out as per the rules in the Australian financial marketplace.
On September 21, the statement of ASIC on X displayed that Bit Trade hadn’t considered the rules while offering margin trading products.
According to ASIC, the design and distribution obligations were introduced in October 2021 and are not followed by Bit Trade. Going down to details, around 1160 customers of Bit Traders used the margin trading productions and encountered a total loss of around $8.35 Million.
Bit Trade has continued to offer the products without making relevant determinations since June 2022.
ASIC deputy chair Sarah Court also responded to the case, stating that the actions will help the crypto industry remember the rules and regulations as well as adopt the country’s consumer protection laws.
The Response of Bit Trade
Considering the entire situation, Jonathan Miller, Kraken’s managing director, defended
“ASIC’s statement was completely a surprise for us”, stated Jonathan in an interview with Cointelegraph.
With full force, the cryptocurrency exchange is interacting with ASIC to resolve the matter as soon as possible. As per Jonathan’s perspective, the trading product is offered in compliance with Australian rules and regulations and he is expecting clarity on this matter.
To do so, he also described what the product actually contains. The margin trading product is a margin extension that permits individuals to receive an extension of credit up to five times.
In response to this, ASIC claimed that Bit Trade’s respective product is a credit facility and is not going as per the obligations.
ASIC is pursuing declarations, injunctions, and penalties against Bit Trader for violating its design and distribution obligations.
Conclusion
Kraken, a crypto exchange provider in Australia, failed to adopt the design and distribution obligations set by Australian regulatory authorities. The Bit Trade company simply failed to make a target market analysis before offering the margin trading products to the Australian market. Declarations, injunctions, and penalties are expected from ASIC on ongoing conduct.
Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.
