In recent developments, Bit Trade Pay Ltd, the crypto exchange operator for Kraken, an Australian-based company, has lost its court case against the country's regulator, the Australian Securities and Investment Commission (ASIC). In a court hearing on August 23, the Australian Federal Court ruled that the company's crypto exchange subsidiary violated sections of the Corporation Act.
To clarify, the regulator issued a media release stating that Kraken's Bit Trade conviction was due to non-compliance. "Since October 5, 2021, Bit Trade's 'margin extension' product has been available to customers trading on the Kraken exchange without a target market determination, as required by law. As a result, Bit Trade contravened s994B(2) of the Corporations Act each time it made the product available to a customer," said the ASIC.
What Transpired Between ASIC and Kraken’s Bit Trade
Notedly, the exchange operator designed the margin extension product in fiat currency and crypto to suit Australian users. However, this was not according to the obligations set by the ASIC guiding service and product design, distribution, and target market determination.
According to the ASIC, launching such a margin extension product was a violation. In addition, the ASIC flagged off the Bit Trade feature that allowed users to extend their assets' value by 5× as offering credit services against regulations. Consequently, the Australian regulator took note of the infringements and charged Bit Trade Pay to court in September 2023, resulting in the exchange's present predicament.
ASIC Deputy Chair Reacts
Commenting on the court's ruling, Sara Court, ASIC deputy chair, remarked, "This is a significant outcome for ASIC involving a major global crypto firm. We initiated proceedings to send a message to the crypto industry that we will continue to scrutinize products to ensure they comply with regulatory obligations to protect consumers." The release also states that both parties have seven days to settle "declarations" and "injunctions." Shortly after, the ASIC will outline the penalty for Bit Trade's violations on a decided-upon date.