Cryptocurrency company Bit Trade, Kraken's Australian entity, has been fined AUD 8 million for failing to comply with regulatory requirements for its margin extension product.
Reasons and implications of the fine
Bit Trade has been fined AUD 8 million by the Australian Securities and Investments Commission for unlawfully issuing a credit facility to over 1,100 customers. The Federal Court ruled that the company failed to comply with Australian laws requiring financial products to have a target market determination.
Product details and violations
Since October 2021, Bit Trade offered a margin extension product that allowed extensions and repayments in digital assets like Bitcoin or national currencies. However, the product was marketed without a required target market determination, a key regulatory document ensuring products are suitable for customers. Violations included design and distribution obligations, with customers incurring fees and losses exceeding $7 million, including trading losses of over $5 million.
Expert comments and future actions
Justice Nicholas described Bit Trade's actions as serious and driven by a desire to maximize revenue, emphasizing that the company failed to address compliance requirements until flagged by ASIC. ASIC Chair Joe Longo called it a 'significant outcome', noting it is ASIC's first penalty for lacking a TMD, serving as a reminder for digital asset firms on regulatory compliance.
This case highlights the importance of regulatory compliance in the cryptocurrency market, serving as a warning to companies operating in the digital asset space.
