By Hassan Mehmood (Saudi Arabia)
Regulators in Australia have brought a civil lawsuit crypto exchange subsidiary called Kraken. The prosecution alleges that the crypto entity committed oversight of regulatory requirements for margin trading services.
The Securities and Investment Commission of Australia or ASIC purports that Kraken exchange subsidiary BitTrade overlooked the target market determination for margin trading options before making it accessible to consumers.
For context, it is important to note that target market determination is eligibility criteria for consumers for different trading services. The trading platform is under obligation to set a threshold for different types of investment options for consumers. Only the customers that complete these requirements may partake in the trading opportunities.
The target market determination is a document that contains this information. However, ASIC has retained that BitTrade was operating as a credit facility without a formal target market determination to define the eligibility criteria for consumers who may access these services.
BitTrade Failed to Follow Regulatory Requirements
ASIC officials revealed that the platform started to offer margin trading services since the 2020. However, BitTrade failed to fulfill the regulatory requirements that took place in 2021. On this account, around 1,160 consumers hailing from the region lost $12.95 million by investing in margin trading products.
Deputy Chairperson Sarah retained that the charges brought against the crypto trading should set a precedent for other companies in the sector to ensure compliance. Kraken bought BitTrade in 2020.
Prosecution has also claimed that BitTrade did not complete the design and distribution requirements. These legal obligations are implemented on all companies that offer financial products to Australian consumers.
Commercial entities must undertake specified steps to ensure that their financial products complete the predetermined requirements of their consumers. Furthermore, the second part of the obligation implies that companies much distribute these products through a targeted plan.
Kraken Responds to the Charges Brought by ASIC
Jonathon Miller, managing director at the virtual currency exchange, recently responded to the charges brought by regulators. He told media that regulatory action was a sudden move and claimed that the product has remained compliant with the legislative guidelines.
He further added that the trading platform has been working in tandem with ASIC officials to solve the problem in a constructive manner.
He added that the financial products are issued by the subsidiary that is registered under AUSTRAC. Thus, he concluded that the trading platform was surprised to hear about the enforcement action.
Regulators in Australia have classified BitTrade as a credit facility where Kraken lists it as margin extension. Kraken officials have expressed their determination to continue to cooperate with the regulators on this matter in order to gain clarity.
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