{"id":301613,"date":"2024-08-23T14:50:32","date_gmt":"2024-08-23T14:50:32","guid":{"rendered":"https:\/\/www.techopedia.com\/?post_type=news&p=301613"},"modified":"2024-08-23T14:50:32","modified_gmt":"2024-08-23T14:50:32","slug":"australian-court-rules-kraken-violated-regulatory-requirements","status":"publish","type":"news","link":"https:\/\/www.techopedia.com\/news\/australian-court-rules-kraken-violated-regulatory-requirements","title":{"rendered":"Australian Court Rules Kraken Violated Regulatory Requirements"},"content":{"rendered":"
A court in Australia has issued a landmark ruling against Bit Trade, the operator of the Kraken crypto exchange in Australia.<\/b><\/p>\n
Bit Trade was found to have breached regulatory requirements by offering a margin trading product without adhering to mandated design and distribution obligations.\u00a0<\/span><\/p>\n The ruling, <\/span>announced<\/span><\/a> earlier today (August 23) by the Australian Securities and Investments Commission (ASIC), underscores the increasing regulatory scrutiny faced by major global crypto platforms operating in the region.<\/span><\/p>\n Since October 2021, Kraken’s “margin extension” product has been accessible to Australian customers without the legally required target market determination, a critical legal requirement.\u00a0<\/span><\/p>\n This omission violated Section <\/span>994B(2) of the Corporations Act<\/span><\/a>, which mandates that financial product issuers must identify and outline the appropriate consumer group for such offerings.\u00a0<\/span><\/p>\n https:\/\/twitter.com\/asicmedia\/status\/1826826977229017469<\/span><\/a><\/p>\n The court’s decision hinges on the distinction between crypto assets and national currencies within the margin extension product, finding that repayment in national currencies constitutes a credit facility, subjecting Kraken to additional regulatory obligations.<\/span><\/p>\n Consequently, Kraken’s legal team <\/span>responded<\/span><\/a> to the judgment by highlighting the ambiguity in Australia’s crypto regulations.\u00a0<\/span><\/p>\n They pointed out that the court ruled Kraken’s margin product falls under the Design and Distribution Obligations (DDO) when extending fiat currency but not when dealing in cryptocurrency.\u00a0<\/span><\/p>\n Kraken’s spokesperson stated that it is an “unsatisfactory position for Australian investors,” expressing a preference for legislative reform over legal test cases.\u00a0<\/span><\/p>\n Despite their disappointment, Kraken emphasized its commitment to comply with the court’s ruling and continue to serve its Australian customers.<\/span><\/p>\n Meanwhile, ASIC Deputy Chair Sarah Court <\/span>hailed<\/span><\/a> the ruling as a significant enforcement action, emphasizing its implications for the broader crypto industry.<\/span><\/p>\n “Today\u2019s outcome sends a salient reminder to the crypto industry about the importance of compliance with the design and distribution obligations,” she said.\u00a0<\/span><\/p>\n ASIC has indicated its intent to pursue financial penalties against Bit Trade. Both parties have seven days to agree on the necessary declarations and injunctions.<\/span><\/p>\n Kraken’s regulatory challenges in Australia follow its 2020 <\/span>acquisition of Bit Trade<\/span><\/a>, the country’s oldest crypto exchange. By acquiring Bit Trade, Kraken secured a license to operate in the Australian market, but this move has since led to regulatory challenges for the company.<\/span><\/p>\nKraken’s Violation of Design and Distribution Obligations<\/span><\/h2>\n
ASIC\u2019s Regulatory Action and Industry Implications<\/span><\/h2>\n