Kraken Crypto Exchange Fined by Australian Court

The Federal Court of Australia has ruled that Bit Trade Pty Ltd., operating crypto exchange Kraken in Australia, failed to meet regulatory obligations for its margin trading product. The product was offered without a required market determination, breaching the Corporations Act. ASIC emphasized the need for compliance in the crypto industry, aiming to ensure consumer protection.

Kraken Exchange Operator Violates Australian Regulations With Margin Product, Court Rules

The Australian Securities and Investments Commission (ASIC) announced on Friday that the Federal Court ruled today that Bit Trade Pty Ltd., the operator of Kraken crypto exchange in Australia, failed to meet design and distribution obligations when offering a margin trading product to Australian customers.

Since Oct. 5, 2021, Bit Trade offered its “margin extension” product without the required target market determination, violating section 994B(2) of the Corporations Act each time the product was made available. ASIC explained:

The product provided for margin extensions to be made and repaid in either digital assets (e.g. Bitcoin) or national currencies (e.g. US dollars). ASIC’s case alleged that the obligation to repay a digital asset or national currency was a deferred debt and accordingly, that the product was a credit facility.

ASIC Deputy Chair Sarah Court stated that the ruling “is a significant outcome for ASIC involving a major global crypto firm.” The court emphasized that ASIC’s actions are meant to remind the crypto industry of the necessity of compliance with regulatory requirements. She noted, “Consumers should receive the full protection of the law when dealing in crypto-asset products, and we will continue to take action to ensure this happens.”

Justice Nicholas’s judgment found that while repaying digital assets does not constitute a deferred debt, a margin extension in a national currency does, thereby classifying it as a credit facility. ASIC and Bit Trade have seven days to agree on declarations and injunctions, and ASIC will seek financial penalties against Bit Trade. Entities offering crypto-related products should note that many are considered financial products, requiring adherence to design and distribution obligations.

What do you think about the Australian Federal Court’s decision regarding Kraken’s margin trading product? Let us know in the comments section below. #Write2Earn