Australia’s corporate regulator has initiated civil proceedings against Bit Trade Pty Ltd for failing to comply with design and distribution obligations related to its margin trading product.
The Australian Securities and Investments Commission (ASIC) has alleged that Bit Trade, which provides access to the Kraken crypto exchange for Australian customers, did not conduct a target market determination before offering its margin trading product.
Design and distribution obligations (DDO) are legal requirements in Australia that mandate firms offering financial products to ensure these offerings are tailored to meet customer needs and are distributed appropriately.
ASIC pointed out that Bit Trade allows customers to use credit to buy and sell specific crypto assets on the Kraken exchange, enabling an extension of credit of up to five times the value of the collateral provided. The regulator reported that since the implementation of DDO in October 2021, at least 1,160 customers used Bit Trade’s margin trading product, resulting in a total loss of approximately A$12.95 million (£6.74 million).
Despite being informed of ASIC’s concerns in June 2022, Bit Trade allegedly continued to offer the product without making the necessary determinations. ASIC is seeking declarations, financial penalties, and injunctions to prohibit Bit Trade’s ongoing activities.
Sarah Court, ASIC’s deputy chair, stated: “These proceedings should send a message to the crypto industry that products will continue to be scrutinised by ASIC to ensure they comply with regulatory obligations in order to protect consumers.”
In response, Bit Trade expressed surprise and disappointment regarding the proceedings. Jonathon Miller, managing director of Kraken’s Australian operations, said: “We have been attempting to constructively engage with ASIC on this matter for some time to ensure our product offering, as an AUSTRAC-registered Digital Currency Exchange, remains compliant. We are therefore both surprised and disappointed to have received today’s enforcement action.”