Australian regulator ASIC sues Bit Trade, the Kraken subsidiary, for non-compliance with design and distribution requirements

6:57 am
September 21, 2023

The Australian Securities and Investments Commission (ASIC) has taken legal action against Bit Trade, the operator of the Kraken cryptocurrency exchange in Australia. The regulatory body alleges that Bit Trade failed to comply with design and distribution requirements for one of its trading products, specifically its margin trading product. This failure to establish a target market determination before offering the product to Australian clients is a violation of financial product providers’ obligations in Australia.

Allegations against Bit Trade

According to ASIC, Bit Trade’s margin trading product has been used by at least 1160 Australian customers, resulting in a collective loss of $8.35 million (12.95 million Australian dollars) since the implementation of the design and distribution requirements in October 2021. ASIC notified Bit Trade of its non-compliance in June 2022, but the company continued to offer the product without fulfilling the necessary determinations.

The margin trading product offered by Bit Trade functions as a “margin extension” service, providing customers with credit extensions up to five times the value of their collateral assets. ASIC argues that this product qualifies as a “credit facility,” as it offers credit for trading specific cryptocurrencies on the Kraken exchange.

ASIC’s deputy chair, Sarah Court, stressed the importance of complying with design and distribution requirements to ensure responsible distribution of financial products to consumers. She stated, “ASIC’s actions underscore the importance of complying with design and distribution obligations to ensure that financial products are distributed to consumers in a responsible manner.”

FAQs

What is ASIC?

The Australian Securities and Investments Commission (ASIC) is the country’s financial regulatory body. It is responsible for regulating and supervising Australia’s corporations, financial markets, and financial services industry to promote fairness and transparency.

What are design and distribution requirements?

The design and distribution requirements are legal obligations for financial product providers operating in Australia. They involve designing financial products to meet predetermined customer needs and distributing them through targeted strategies.

What is Bit Trade?

Bit Trade is a cryptocurrency exchange operator in Australia. It is a subsidiary of the popular cryptocurrency exchange Kraken.

What is margin trading?

Margin trading is a trading method that allows investors to borrow funds to trade larger amounts of money than they have available in their accounts. It involves using leverage to potentially increase both profits and losses.


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