Summary:
Federal Court of Australia rules against Kraken operator for margin trading violations.
Bit Trade Pty Ltd. failed to meet regulatory obligations, breaching the Corporations Act.
ASIC emphasizes the need for compliance to protect consumers in the crypto industry.
Ruling classifies margin trading product as a credit facility, requiring specific regulations.
ASIC seeks financial penalties against Bit Trade for non-compliance.
The Federal Court of Australia has delivered a significant ruling against Bit Trade Pty Ltd., the operator of Kraken in Australia, for failing to comply with regulatory obligations concerning its margin trading product. This product was offered without the necessary market determination, violating the Corporations Act. The Australian Securities and Investments Commission (ASIC) stressed the importance of compliance to protect consumers in the crypto sector.
Kraken Exchange Operator Violates Australian Regulations With Margin Product, Court Rules
On Friday, ASIC revealed that the Federal Court ruled that Bit Trade did not meet design and distribution obligations while providing a margin trading product to Australian customers. Since October 5, 2021, the company offered its âmargin extensionâ product without the required target market determination, breaching section 994B(2) of the Corporations Act with every instance of the product being available.
The product allowed margin extensions to be made and repaid in either digital assets (like Bitcoin) or national currencies (such as US dollars). ASIC argued that the obligation to repay in these forms constituted a deferred debt, classifying the product as a credit facility.
ASIC Deputy Chair Sarah Court remarked that this ruling represents a significant outcome for ASIC and serves as a reminder to the crypto industry of the importance of regulatory compliance. She emphasized, âConsumers 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.â
Justice Nicholas's ruling clarified that while repaying digital assets does not constitute a deferred debt, a margin extension in a national currency does, thus categorizing it as a credit facility. Both ASIC and Bit Trade are to reach agreements on declarations and injunctions within seven days, with ASIC pursuing financial penalties against Bit Trade. It is crucial for entities offering crypto-related products to recognize that many are classified as financial products, which necessitate adherence to design and distribution obligations.
What are your thoughts on the Australian Federal Courtâs decision regarding Krakenâs margin trading product? Share your views in the comments below.
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