The Australian Securities and Investments Commission (ASIC) has launched a legal action against Bit Trade. The latter is the operator of the Kraken cryptocurrency exchange in Australia and also functions as an independent firm. Like the rest, Bit Trade has also been doing fine with its decent user base. However, it recently came under the regulatory lens of ASIC for not meeting some particular criteria.
What is ASIC’s Legal Action on Bit Trade All About?
According to the allegations, Bit Trade offered a margin trading product without creating a target market determination. As per Australian law, companies have to create financial products according to the predetermined needs of customers. It also mandates the design and distribution obligations as legal requisites for firms offering financial services.
Notably, the Australian Commission introduced these obligations in October 2021. Despite being active in markets of the land, Bit Trade did not comply with prescribed rules. Moreover, the body stated that it informed Bit Trade about its violations in 2022. The exchange continued to offer the product without making the necessary determinations.
As per the claims, Australian customers, who subscribed to the margin trading product, suffered losses worth 12.95 million AUD. Jonathan Miller, the managing director of Kraken’s Australian operations, responded in surprise. He said that the company has adhered to all the legal obligations. He even said that the firm has been trying to work with ASIC on the same issue.
Furthermore, Miller expressed disappointment after receiving the regulator’s response. He emphasized that the product complied with the Australian law. He also gave some information about the concerned product. According to Miller, the margin trading product gives a “margin extension” to the customers. Using this product, the customers can use the value of assets as collateral. They can receive credit extensions of up to five times on them.
ASIC differs from Miller’s argument. It says this product becomes a credit facility rather than a margin extension. That’s because it provides credit for use in selling and purchasing crypto assets. Sarah Court, the deputy chair of ASIC, said this incident is a precedent for the crypto industry. It will remind them that no crypto product will bypass the regulatory lens. She said that the consumer protection laws in Australia will always ensure that.
The court mentioned that ASIC’s actions underline the importance of compliance with the design and distribution obligations. This case also highlights the ongoing tussle between regulators and crypto entities globally. The arguments have been going the same way for some time.
Companies blame regulators for needing to be more explicit in their rules. On the other hand, the regulators say that crypto firms do not heed compliance. In between them, it is the customer that ends up suffering. The crypto community hopes the disputes between regulators and crypto firms will be solved sooner because they want the technology to thrive and make their lives better.