The Australian Securities and Investments Commission (ASIC) has initiated civil proceedings against Bit Trade, the operator of the Kraken cryptocurrency exchange in Australia. ASIC alleges that Bit Trade failed to adhere to design and distribution obligations concerning one of its trading products.
The regulator contends that Bit Trade did not properly identify its target market before offering margin trading products to Australian customers. Design and distribution obligations are regulatory requirements in Australia that demand companies offering financial products to design them in line with customers' needs and distribute them through targeted channels.
ASIC stated that since the introduction of these obligations in October 2021, around 1,160 Australian customers have utilized Bit Trade's margin trading products and incurred collective losses of approximately $8.35 million (AUD 12.95 million).
The regulator reported that it had informed Bit Trade of its failure to meet these obligations in June 2022, but Bit Trade continued offering the product without taking corrective measures.
In response, Jonathon Miller, managing director of Kraken's Australian operations, expressed surprise and disappointment, believing that the product complied with local regulations. He noted that they had been engaging constructively with ASIC to ensure compliance and would continue to work to clarify the matter.
Bit Trade's margin trading product, described as a "margin extension" service, allows clients to access credit extensions up to five times the value of their collateralized assets. ASIC, however, argues that it constitutes a "credit facility" as it provides customers with credit for buying and selling certain cryptocurrencies on the Kraken exchange.
ASIC Deputy Chair Sarah Court emphasized that this action should remind the cryptocurrency industry of the importance of complying with design and distribution obligations, ensuring that financial products are distributed appropriately to consumers while adhering to consumer protection laws.
