Cryptocurrency Exchange Kraken The court on Friday cited Australia’s lack of regulatory clarity as the reason for its ruling against the local operator of the exchange. The court ruled in favor of the local operator of the exchange in a case brought by the country’s securities regulator.
The Federal Court of Australia today ruled that Kraken’s local operator, Bit Trade Pty Ltd, failed to comply with section 994B of the Corporations Act, which states that issuers of financial products must make a “target market determination” before offering their products to consumers.
The Australian Securities and Investments Commission (ASIC) said that “from 5 October 2021, Bit Trade’s ‘Margin Extension’ product was available to customers trading on the Kraken exchange without a target market determination.” nameASIC has taken legal action against Bit Trade through litigation.
Kraken said it would comply with the ruling on margin offerings, but noted Friday’s ruling was a “yes” to the country’s lack of clarity on cryptocurrency regulation.
“Specifically, the court ruled that Kraken’s margin offerings are subject to a set of rules called design and distribution obligations when providing fiat currency to customers, but not when providing cryptocurrency to customers,” a Kraken spokesperson said in a statement shared with The Block.
“In our view, this is an unsatisfactory position for Australian investors and we are advocating for legal clarity across all areas of cryptocurrencies and Web3 as soon as possible,” a Kraken spokesperson added.
According to a statement from ASIC, the judge ruled that redeeming digital assets was not a deferred debt as it was the same as redeeming money, but agreed with ASIC that lending in traditional currency was a credit facility as it created a deferred debt.
“This is a significant finding for ASICs associated with major global cryptocurrency companies.“ ASIC Deputy Chairperson Sarah Court said: “We have initiated a process to send a message to the cryptocurrency industry that we will continue to closely review products to ensure they comply with regulatory obligations to protect consumers.“
ASIC and BitTrade were given seven days to come to an agreement on the declaration and injunction. The regulator said in a statement that it would seek financial penalties against Kraken’s operators.
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