The Australian Securities and Investments Commission (ASIC) has recently won a court case against Bit Trade, the operator of Kraken, for failing to comply with design and distribution obligations. The Federal Court ruled that Bit Trade did not have a clear design when offering margin trading products, leading to a breach of the country’s Corporations Act since October 2021. This ruling sends a clear message to the Australian crypto industry that ASIC will crack down on non-compliant players to protect consumers and ensure regulatory compliance.
Bit Trade, an AUSTRAC-registered firm, provided margin extension products in both crypto and fiat currencies without a target market determination. Design and distribution obligations require companies to design financial products that meet the needs of Australians, including specifying appropriate customers through target market determinations. ASIC argued that Bit Trade’s margin trading product was launched without a target market determination, violating regulatory requirements. The regulator filed a civil suit against the firm in September 2023 for these violations.
In addition to the lack of target market determination, ASIC also noted that Bit Trade’s product allowed Australians to receive an extension of 5x credit of the asset’s value, operating as a credit facility without proper regulatory approval. This violation of regulations further supported ASIC’s decision to take legal action against Bit Trade. In 2020, Kraken acquired Bit Trade to expand its digital asset services in Australia, making this ruling and legal action significant for both companies and the broader crypto industry in the country.
ASIC Deputy Chair Sarah Court emphasized the importance of ensuring compliance with regulatory obligations in the crypto industry to protect consumers. She stated that it is a legal requirement for financial products, including crypto assets, to be distributed appropriately to ensure consumer protection. By holding non-compliant players like Bit Trade accountable, ASIC aims to enforce regulatory standards in the industry and prevent potential risks to consumers. The court ruling against Bit Trade serves as a reminder to all crypto firms in Australia to adhere to regulatory requirements to avoid facing similar legal actions in the future.
Overall, the court ruling in favor of ASIC against Bit Trade highlights the importance of regulatory compliance in the Australian crypto industry. By enforcing design and distribution obligations, ASIC aims to protect consumers and maintain the integrity of the financial system. The legal action against Bit Trade for non-compliance with regulatory requirements, including the lack of target market determination and operating as a credit facility without approval, demonstrates ASIC’s commitment to upholding standards in the crypto sector. This case sets a precedent for other crypto firms in Australia to ensure compliance with regulatory obligations to avoid facing penalties and legal consequences.
