Bit Trade, the Australian supplier of the Kraken cryptocurrency exchange, is being sued by the Australian Securities and Investments Commission (ASIC) for violating the design and distribution requirements for one of its trading products. Australian State law imposes design and distribution duties on businesses that provide financial products, which was the beginning of the objectionable reasons as the Australian regulator sues Bit Trade. The standards outline precise requirements for businesses to develop financial solutions that address consumers’ predetermined needs and then distribute the same using a targeted strategy.
In a statement released on September 21, ASIC claimed that Bit Trade had neglected to identify its target market before making its margin trading product available to Australian clients. Soon after, the Australian regulator sued Bit Trade about the aforesaid allegations and proceeded with the case.
What is Bit Trade’s fault here?
Bit Trade allegedly continued to promote the product despite ASIC’s claims that it had been informed of its failure to adhere to the duties in June 2022. The decision by ASIC surprised Jonathon Miller, managing director of Kraken’s Australian operations, who insisted that the product complied with all applicable laws.
Miller said that his exchange has been, for some length of time, expediently trying to “constructively engage” with ASIC on this sensitive issue to guarantee that Kraken’s product offering maintains compliance just as an AUSTRAC-registered Digital Currency Exchange.
What the Aussie Regulator has to say?
The ASIC posted the followers on social media application X when announcing their decision to implicate Bit Trade: “We are suing Bit Trade, provider of the Kraken crypto exchange in Australia, for allegedly failing to comply with the design and distribution obligations (DDO) for its margin trading product. Since October 2021, customers have lost about $12.95 million.”
It is to be noted that the “margin extension” feature offered by Bit Trade’s margin trading product enables users to easily extend credit as much as five times the total value of the assets that they employ as collateral.
Through this public media post, it could be understood that the Australian authority is claiming that at the very least, approximately 1160 Australian customers have used Bit Trade’s margin trading product since the introduction of design and distribution obligations in October of 2021 and that they all had incurred a total and collective financial loss worth nearly USD$8.35 million.
Other Official Reactions
The controversial and impugned margin trading product, according to the Australian government financial authority, is a “credit facility” because it gives consumers “credit for use in the sale and purchase of certain crypto assets on the Kraken exchange.”
The proceedings, according to ASIC deputy chair Sarah Court, should serve as a reminder to the cryptocurrency business sector that financial services will continue to be examined by regulators to make sure they comply with the nation’s consumer protection laws. Sara Court went on and say in an official statement, “ASIC’s action should be a reminder of the importance of complying with the design and distribution obligations so that financial products are distributed to consumers appropriately.”
Following the reveal on the internet that the Australian regulator is suing Bit Trade, Kraken MD Jonathan Miller said in a press release, “We are therefore both surprised and disappointed to have received today’s enforcement action. We believe this product is offered in compliance with Australian law, and will continue our efforts to receive clarity on this matter.”
As the Australian regulator sues Bit Trade, the crypto scene sees a polarized split as some token enthusiasts support the organization while other people express reproval at this course of action. The most prominent of the latter faction appears to be, of course, the Kraken Crypto Currency Exchange, which has not been deciding for litigation by AISC positively ever since the Australian regulation agency made the news public.