Australia’s securities regulator has initiated civil proceedings against Bit Trade Pty Ltd, an entity providing Kraken services to Australian users. According to the government agency, the company failed to comply with regulatory obligations meant to ensure proper consumer protection.
Australian Regulator Seeks to Prohibit Kraken Partner From Ongoing Conduct
The Australian Securities and Investments Commission (ASIC) has sued Bit Trade, which provides services from U.S. crypto exchange Kraken in Australia, Reuters reported quoting a statement by the regulator on Thursday.
In spite of the Commission notifying Bit Trade of its concerns in June 2022, ASIC claims that Bit Trade did not adhere to the applicable design and distribution (DDO) obligations for its margin trading product and that Bit Trade still offers it.
Financial companies are required by the DDO responsibilities to create products that cater to consumer demands and distribute them in a targeted way. ASIC asserts that before marketing the goods to customers, Bit Trade failed to identify the product's target market.
According to the securities authority, the in question margin trading product is a type of credit facility because it gives users credit to buy and sell particular crypto assets on Kraken. Customers may be granted a credit extension for up to five times the value of the goods they pledge as collateral, according to ASIC.
The regulatory agency also stated that since the product's creation and distribution started in October 2021, at least 1,160 consumers had exploited the margin trading feature, resulting in a total loss of around $8.35 million ($12.95 million A$).
According to the newspaper, ASIC is currently requesting declarations, monetary fines, and injunctions forbidding Bit Trade's further activity. The Commission's Deputy Chair Sarah Court was reported as saying:
These actions need to serve as a warning to the cryptocurrency industry that ASIC will continue to check products to make sure they adhere to legal requirements for consumer protection.
Binance is one of the other significant exchanges that have had problems this year in Australia, a country that has not yet fully regulated cryptocurrency trading. The largest exchange for digital assets lost AUD deposit and withdrawal capabilities through two domestic payment providers, Payid and Cuscal, in May after a global regulatory crackdown.
ASIC revoked FTX Australia's financial services license in July. FTX Australia was a local business that was controlled by the defunct cryptocurrency exchange with its headquarters in the Bahamas, FTX, which had filed for bankruptcy in the US in November.
The Commonwealth Bank of Australia (CBA), the largest lender in Australia, also declared its plan to limit payments to cryptocurrency trading sites. Another Big 4 Australian bank, National Australia Bank (NAB), responded to its action by blocking payments to "high-risk" exchanges as well.
Do you believe the Australian government will put more regulatory pressure on cryptocurrency trading platforms? Post your opinions about it in the comments area below.