The Judge ruled that Bit Trade Pty Ltd. issued its financial product to retail clients without having first made a target market determination for the product.
The Federal Court of Australia ruled on Friday that cryptocurrency exchange Kraken’s operator in the country, Bit Trade Pty Ltd, “contravened” with a section of the nation’s Corporations Act. The case against Bit Trade was brought by the Australian Securities and Investments Commission (ASIC).
Section 994B of the Corporations Act requires an issuer of a financial product to make a “target market determination” prior to the product being offered to consumers.
Justice Nicholas determined that “By issuing the Product to retail clients without having first made a target market determination for the Product, Bit Trade contravened s 994B(1) of the Corporations Act when read with s 994B(2).”
ASIC said “Since 5 October 2021, Bit Trade’s “margin extension” product has been available to customers trading on the Kraken exchange without a target market determination, as required by law.”
ASIC’s announcement also said that the Judge “found the obligation to repay a digital asset was not an obligation to repay money and was therefore not a deferred debt” but agreed with ASIC that “a margin extension in a national currency created a deferred debt which meant that the product was a credit facility.”
“Overall, we’re disappointed by today’s ruling, but we’re prepared and willing to comply with the court’s decision,” a Kraken spokesperson said in a statement sent via email. “We’re pleased the judge understood the nuances in this case, and recognised the challenges in applying existing regulatory frameworks to innovative technologies.”
Kraken’s legal spokesperson cited the judgment as an example of how “the law with respect to crypto offerings in Australia is not clear, adding that the “Court found that Kraken’s Margin offering is subject to a set of regulations called the Design and Distribution Obligations when we extended fiat currency to clients, but not when we extended cryptocurrency to clients.”
“This is an unsatisfactory position for Australian investors. While we prefer that to be through legislative reform rather than test cases, at least we now have clarity from the Court in respect of our Margin offering, and will move quickly to comply and continue to service our customers.”
ASIC said “the two parties have been given seven days to agree on declarations and injunctions” and that it would “seek financial penalties against Bit Trade.”
“This is a significant outcome for ASIC involving a major global crypto firm,” said Sarah Court, ASIC Deputy Chair. “We initiated proceedings to send a message to the crypto industry that we will continue to scrutinise products to ensure they comply with regulatory obligations in order to protect consumers.”
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Source: Vietnam Insider