Australian Regulator Takes Legal Action Against Bit Trade for Compliance Breach
The Australian Securities and Investments Commission (ASIC) has filed a lawsuit against Bit Trade Pty Ltd, the provider of the Kraken cryptocurrency exchange for Australian users. The regulatory body alleges that Bit Trade failed to meet design and distribution obligations related to its margin trading product.
ASIC Deputy Chair Sarah Court emphasized the importance of complying with regulatory obligations to protect consumers. The agency claims that Bit Trade did not establish a target market determination for the product, despite receiving notification about this compliance issue in June 2022.
Design and Distribution Obligations for Financial Products
Design and distribution obligations are legal requirements for companies offering financial products in Australia. These obligations ensure that firms design products that meet customers’ needs and distribute them through a targeted approach.
ASIC’s legal action seeks declarations from the court, financial penalties, and injunctions to prevent further breaches of compliance by Bit Trade. The court is currently determining the schedule for the initial case management hearing.
Bit Trade’s Margin Trading Product and Losses Incurred
Bit Trade’s margin trading product functions as a credit facility, allowing customers to trade certain crypto assets on the Kraken exchange. Since its introduction in January 2020, at least 1,160 Australian customers have used this product, resulting in an aggregate loss of approximately $8.35 million (12.95 million Australian dollars).
Bit Trade’s Relationship with Kraken
Bit Trade has been providing its margin trading product to Australian customers through the Kraken exchange since 2020. Kraken has acquired several companies in recent years, including Bit Trade, as part of its expansion strategy.
Hot Take: ASIC Sends Message to Crypto Industry on Compliance
The legal action taken by ASIC against Bit Trade serves as a reminder to the crypto industry about the importance of complying with regulatory obligations. This action aims to protect consumers and ensure that financial products are distributed appropriately.
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