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The Australian Securities and Investments Commission (ASIC) has launched a legal case against Bit Trade Pty Ltd, which offers Kraken cryptocurrency exchange services to Australian users. ASIC’s claims focus on Bit Trade’s non-compliance with design and distribution obligations (DDO) pertaining to its margin trading product, allegedly resulting in significant losses for customers.
The DDO framework, aimed at consumer protection, requires financial institutions to design products that cater to customer needs and distribute them in a responsible and targeted manner. ASIC contends that Bit Trade did not conduct a target market determination for its margin trading product prior to making it available to Australian clients, as mandated by law.
Bit Trade’s margin trading product functions as a credit facility, allowing customers to borrow funds to trade specific cryptocurrencies on Kraken. The credit provided can reach up to five times the value of the collateralized assets, which could heighten financial risks for consumers.
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Since the DDO was enforced in October 2021, ASIC has identified more than 1,160 clients utilizing Bit Trade’s margin trading product, leading to total losses of around A$12.95 million ($8.35 million). The civil action initiated by ASIC seeks to address these reported compliance issues.
ASIC’s Deputy Chair, Sarah Court, highlighted the significance of regulatory oversight in protecting consumers within the cryptocurrency domain. She remarked, “These proceedings should convey a clear message to the crypto sector that products will be closely examined by ASIC to ensure adherence to regulatory requirements designed to safeguard consumers.”
Bit Trade has been providing its margin trading product to Australian clients through Kraken since January 2020. Despite concerns voiced by ASIC in June 2022, the company persisted in offering the product without establishing a target market determination, which is essential for responsible distribution under the DDO.
In light of these allegations, ASIC is pursuing declarations, financial penalties, and injunctions to cease Bit Trade’s ongoing activities. The date for the initial case management hearing has yet to be set by the Court. Nonetheless, this legal action highlights the critical nature of regulatory compliance in the cryptocurrency sector and its importance in consumer protection.
The post ASIC Initiates Legal Action Against Bit Trade Over DDO Violations appeared first on BitcoinWorld.
