Australian regulatory authority declares victory over Kraken’s Bit Trade in federal court

A court has determined that Bit Trade violated Australian laws by offering a product without adhering to design and distribution obligations and acting as a credit facility.

Australia’s federal court has ruled in favor of the country’s financial regulator, ASIC, against Bit Trade, the proprietor of Kraken’s crypto exchange in Australia.

The court determined that Bit Trade did not adhere to its design and distribution obligations and operated as a credit facility without a license.

The Australian Securities and Investments Commission (ASIC) filed a civil complaint against Bit Trade in September 2023, contending that the margin trading product was introduced without a target market determination that identified the appropriate customers.

Bit Trade broke these legal requirements by “issuing the Product to retail clients without having first made a target market determination for the Product,” according to Justice John Nicholas’s Aug. 23 judgment.

In order to provide financial products in Australia, it is mandatory to fulfill design and distribution obligations. They have specific requirements for firms to design products that satisfy the predetermined demands of consumers and then distribute them through a targeted plan.

Simultaneously, ASIC contended that Bit Trade’s product was operating as a credit facility in violation of regulations, as it permitted customers to receive an extension of credit up to five times the value of the assets they used as collateral.

“When a Margin Extension is provided in a national currency, such as Australian or U.S. dollars, the customer incurs a ‘deferred debt’,” Justice Nicholas stated in his judgment.

Consequently, it “becomes payable upon the customer’s cessation of eligibility for the Margin Extension.” So, the Product is a credit facility.

Declarations and injunctions have been the subject of a seven-day negotiation between ASIC and Bit Trade. ASIC has declared that it will pursue financial penalties against Bit Trade.

Sarah Court, the Deputy Chair of ASIC, stated that this case serves as a reminder to the crypto industry to “adhere to regulatory obligations” while functioning in Australia.

“Today’s result serves as a reminder to the crypto industry of the significance of adhering to the design and distribution requirements,” she stated.

“The appropriate distribution of financial products to consumers is a legal requirement.” A Kraken spokesperson stated in a statement to Cointelegraph that they are “prepared and willing” to comply with the court’s decision, despite their disappointment with today’s ruling.

The spokesperson stated, “Today’s ruling serves as yet another illustration of the innovative nature of cryptoassets.”

“We are delighted that the judge recognized the challenges in applying extant regulatory frameworks to innovative technologies and comprehended the nuances of this case.”

In 2020, Kraken, a crypto exchange situated in the United States, acquired Bit Trade, the earliest crypto exchange in Australia. Kraken thus acquired the license to operate in Australia.

Also Read: Sony has partnered with Startale to introduce Soneium blockchain