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ASIC Takes Action Against Kraken’s Bit Trade Over Compliance Failures

ASIC Takes Action Against Kraken’s Bit Trade Over Compliance Failures;

The Australian Securities and Investments Commission (ASIC) has launched civil proceedings against Bit Trade, which facilitates the Kraken crypto exchange’s operations in Australia. The financial regulator alleges that Bit Trade did not adhere to the country’s design and distribution obligations while offering its margin trading product.

According to an official statement from ASIC on Sept. 21, Bit Trade supposedly overlooked making a target market determination before promoting its margin trading service to Australians. Such design and distribution obligations are pivotal in Australia. They necessitate firms to tailor financial products aligning with customers’ preset needs and then roll them out through a strategic plan.

Significantly, since these obligations became effective in Oct. 2021, about 1160 Australian users have engaged with Bit Trade’s margin trading service. Consequently, these users faced a cumulative loss of nearly $8.35 million (equivalent to 12.95 million Australian dollars).

However, the twist came when the company continued its offerings despite ASIC alerting Bit Trade about its compliance failures in June 2022. They allegedly did so without making the necessary market determinations.

Jonathon Miller, the individual at the helm of Kraken’s operations in Australia, expressed his surprise at ASIC’s move. Speaking to Cointelegraph, Miller stated, “We were under the impression our product aligned with local obligations.” He added, “Our ongoing attempts to liaise with ASIC aimed to keep our offerings, recognized by AUSTRAC, in line with the law. Hence, today’s enforcement action is both unexpected and disheartening.”

Bit Trade’s controversial product, known as the “margin extension” service, grants customers a credit extension. This can be up to five times their collateral assets’ value. Nevertheless, ASIC counters this by designating the service as a “credit facility.” The product offers “credit for crypto assets’ sale and purchase on the Kraken platform.”

Sarah Court, ASIC’s deputy chair, articulated the essence of this proceeding. She emphasized that the crypto sector should view this as a stern reminder. Financial products will always be under the regulatory lens to guarantee compliance with Australian consumer protection laws. In her words, “ASIC’s move underscores the significance of adhering to design and distribution obligations, ensuring financial products align with consumer needs.”


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