The Australian Securities and Investments Commission (ASIC) has filed a civil penalty action against Bit Trade Pty Ltd, which operates the Kraken cryptocurrency exchange in Australia, for breaching the design and distribution obligations of margin-traded products.。

ASIC Sues Kraken Operator

ASIC recently announced that Kraken failed to make mandatory target market determinations for the products it offers in the country.。Although ASIC notified the company of the failure in June 2022, the company continued to issue without identifying a target market.。

Bit Trade's margin trading product is a credit facility, ASIC says。The exchange offers customers credit for buying and selling cryptocurrencies, known as a "margin extension," which Kraken customers can use to get up to five times the value of their mortgage assets.。

Payward subsidiary Bit Trade has been offering margin trading products since January 2020。The regulator stressed that at least 1,160 Kraken Australian customers have used the margin-traded product since its design and distribution obligations began, losing about $A12.95 million.。

"These procedures should send a message to the cryptocurrency industry that ASIC will continue to review products to ensure they comply with regulatory obligations, thereby protecting consumers," said Sarah Court, ASIC's vice chairman.。"

"ASIC's actions should serve as a reminder of the importance of complying with design and distribution obligations so that financial products can be properly distributed to consumers."。"

Design and Distribution Obligations

ASIC introduced design and distribution obligations in October 2021 to protect the interests of retail customers, cracking down on companies and platforms that violate the new rules.。

Earlier, ASIC sued eToro for breaching its design and distribution obligations to offer contracts for difference (CFD) to Australian investors; it also issued stop-loss orders to other CFD brokers, including Saxo Capital Markets and Mitrade.。

Recently, the regulator revealed its intention to further tighten the design and distribution rules for financial service providers.。

Kraken Response

Bit Trade operates in Australia and is registered with AUSTRAC。Following ASIC's action, the company's managing director, Jonathon Miller, revealed to Cointelegraph that they had "attempted for some time to engage constructively with ASIC on this matter."。