The Australian Securities and Investments Commission (ASIC) has initiated legal action against Bit Trade, the provider of the Kraken cryptocurrency exchange in Australia, for alleged non-compliance with design and distribution obligations (DDO) for one of its trading products.
ASIC claims that Bit Trade, the provider for Kraken, failed to establish a target market determination before offering its margin trading product to Australian customers. DDO is a legal requirement in Australia for firms that provide financial products, requiring them to design products that meet predefined customer needs and distribute them according to a specific plan.
ASIC asserts that Bit Trade’s margin trading product functions as a credit facility by extending credit to customers for the purchase and sale of specific cryptocurrencies on the Kraken exchange. Bit Trade has reportedly offered this product to Australian customers via Kraken since January 2020. Since the implementation of DDOs in October 2021, ASIC alleges that at least 1,160 Australian customers have utilized Bit Trade’s margin trading product and suffered a collective loss of approximately $12.95 million.
ASIC’s deputy chair, Sarah Court, emphasized that these legal proceedings serve as a message to the cryptocurrency industry that ASIC will continue to scrutinize products to ensure compliance with regulatory obligations and consumer protection.