Australian Regulator Claims Court Victory Over Kraken’s Australian Division

The Australian federal court said it ruled against Bit Trade, Kraken’s Australian unit, in a case initiated by the Australian Securities and Investments Commission. The regulator stated that Bit Trade launched its product without following the necessary design and distribution requirements, which went against financial regulations.

According to the report, section 994B of the Corporations Act mandates that a company developing a financial product must first decide on the target audience, a step called a target market determination. This decision must be made before the product is available for consumers to purchase.

The Australian Court Found Bit Trade Violated Sections 994b(1) And 994b(2)

Justice Nicholas stated that Bit Trade violated the law by selling the Product to retail clients without first deciding on a target market. According to the Corporations Act, this step is necessary, and Bit Trade’s failure to do so breached sections 994B(1) and 994B(2) of the Act.

The Australian Securities and Investments Commission noted since 5 October 2021, Bit Trade has provided its ‘margin extension’ product to clients trading on the Kraken exchange. The firm did this without first completing a target market determination.

The regulator said the Judge decided that the duty to return a digital asset was not the same as repaying money and thus was not a deferred debt. The Judge did agree with the Australian Securities and Investments Commission that a margin extension in a national currency led to a deferred debt, making the product a credit facility.

Kraken’s Spokesperson Expressed Disappointment But Will Comply With The Ruling

Kraken’s spokesperson revealed in an email statement that the exchange is disappointed with the ruling, but it is ready and willing to follow the court’s decision. He added that Kraken is pleased the Judge understood the details of this case and saw the difficulties in applying current rules to new technologies.

Another spokesperson focused on Kraken’s legal sector revealed that the judgment shows the law regarding cryptocurrency offerings in Australia is not straightforward. He said the Court found Kraken’s Margin offering is subject to the Design and Distribution Obligations for fiat currency but not for cryptocurrency.

ASIC announced that both parties have a week to settle on declarations and injunctions. It added that it plans to pursue financial penalties against Bit Trade.

The Deputy Chair of ASIC, Sarah Court, stated that this outcome is important for the regulator and involves a major global cryptocurrency company. She noted that the authority began these proceedings to signal to the crypto industry that it will continue to examine products. It aims to ensure firms meet regulatory requirements and protect consumers.