The regulator says since the obligations came into effect at least 1,160 Australian clients have used the Kraken margin trading product, incurring a total loss of approximately $12.95 million.
Kraken Australia CEO Jonathon Miller says the company believes it complies with the law. James Brickwood
ASIC deputy chair Sarah Court said the procedure should send a message to the industry that products will continue to be scrutinised. "ASIC's action should be a reminder of the importance of meeting design and distribution obligations so that financial products are distributed appropriately to consumers," Ms Court said.
Cryptocurrency exchanges including Kraken, BTC Markets, Swyftx, and Coinbase are still waiting for the government introduce regulation to govern the sector. Several exchanges collapsed last year, notably FTX by Sam Bankman-Fried.
Kraken local CEO Jonathon Miller said The Australian Financial Review he believed his company was meeting its obligations and that ASIC's action had been unexpected.
โWe have been attempting to engage constructively with ASIC on this matter for some time to ensure our product offering, as an AUSTRAC registered digital currency exchange, remains compliant,โ he said. โWe are both surprised and disappointed to have received today's enforcement action. โWe believe this product is offered in accordance with Australian law and we will continue our efforts to obtain clarity on this matter.โ
ASIC said it had notified Bit Trade of its concerns about non-compliance with design and distribution obligations in June last year, but that the company had continued to offer the product to Australian customers without a determination of the target market.
The regulator's proceedings against Kraken follow a separate lawsuit against Block winner late last year, which ASIC said offered unlicensed financial products to retail investors.
He has also demanded Gold Coast-based BPS Financial about a crypto product known as Qoin last Octoberalleging unlicensed conduct and deceptive promotion of cryptoassets, and also took action against funds operated by Holon Investments Australia, which involved the issuance of interim suspension orders to prevent Holon from offering or distributing three crypto funds to retail investors.
Kraken has already faced legal trouble elsewhere this year, when it was forced to end its cryptocurrency-as-a-service platform for US customers, which were considered unregistered securities. He had to pay US$30 million ($46.5 million) to settle Securities and Exchange Commission (SEC) charges related to the matter.
