- The ruling, which marks a significant victory for the ASIC, allegedly categorizes the margin extension product as a credit facility.
- ASIC plans to seek financial penalties against Bit Trade and the case highlights the ongoing regulatory challenges for global crypto firms.
A recent ruling by the Federal Court of Australia has brought to light significant compliance issues surrounding Kraken’s operations in the country, Coindesk reported. Bit Trade Pty Ltd, Kraken’s local operator, was found to have violated Australian financial regulations by offering a margin extension product to retail clients without conducting a required target market determination.
This ruling, which marks a notable victory for the Australian Securities and Investments Commission (ASIC), underscores the growing scrutiny faced by cryptocurrency exchanges in the country. Justice Nicholas determined that Bit Trade breached Section 994B of the Corporations Act, which mandates that financial product issuers must assess and define the target market for their offerings before they reach consumers.
According to ASIC, Bit Trade’s margin extension product has been available on the Kraken exchange since October 2021 without the legally required target market determination. The court found that this oversight placed Bit Trade in direct contravention of the Corporations Act.
See Related: Kraken Exchange Opens Waitlist For An Upcoming NFT Platform
Bit Trade’s Breach And ASIC’s Case
Justice Nicholas clarified that while the repayment of a digital asset does not constitute a deferred debt, the extension of margin in national currency does, thereby categorizing the product as a credit facility.
In response to the ruling, a Kraken spokesperson expressed disappointment but emphasized the company’s commitment to compliance. “We’re prepared and willing to comply with the court’s decision,” the spokesperson said. They also highlighted the complexity of applying traditional regulatory frameworks to emerging technologies, acknowledging the court’s recognition of these challenges.
Following the ruling, ASIC announced that the two parties had seven days to agree on declarations and injunctions. Additionally, ASIC intends to seek financial penalties against Bit Trade, further highlighting the regulatory challenges that global crypto firms face as they navigate differing legal landscapes.
