Global cryptocurrency exchange Kraken has been fined A$8 million by Australian regulators. The fine relates to Kraken's margin enhancement products that were offered without the required target market determination (TMD). ASIC's claims include significant financial harm to Kraken's customers and material regulatory violations. Despite this ruling, Australian regulators are focused on updating financial regulations to support the digital asset sector.
Global cryptocurrency exchange Kraken has been in trouble with Australian regulators over A$8 million.
Kraken's history in Australia dates back to 2013 via Bit Trade, which was acquired and rebranded by Kraken in 2020. However, the crypto exchange's problems arose in October 2021, when the platform began offering “margin extension” products.
The company has now been ordered to pay millions of dollars by the Federal Court of Australia.
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ASIC claims Kraken violated margin extension policy
The case began last year when Australia's regulatory watchdog, the Australian Securities and Investments Commission (ASIC), alleged that Kraken had breached its margin extension policy.
Specifically, Kraken offered customers the ability to borrow funds that could be repaid in digital assets or fiat currency while leveraging their positions. Essentially, investors can magnify their profits as well as their losses by borrowing money.
However, this service is illegal in Australia unless you perform Target Market Determination (TMD).
ASIC Chairman Joe Longo spoke about the importance of TMD in providing margin trading and similar products.
Determining your target market is fundamental to ensuring you don’t inappropriately sell products that could harm investors… BitTrade has issued margin extension products to over 1100 Australians was charged more than US$7 million in fees and interest without considering whether the product was suitable or not. they.
ASIC Chairman Joe Longo
Kraken fined for illegal margin extension under regulatory scrutiny
The Federal Court was satisfied that Kraken violated several regulations when it offered margin extensions to customers without an appropriate TMD in place.
[Bit Trade] The requirements of the DDO regime were not brought to our attention until they were first brought to our attention by ASIC…Bit Trade's breaches were serious and motivated by a desire to maximize profits.
Judge Nicholas, Presiding Judge
According to ASIC, customers who participated in Kraken's margin extension program lost more than US$5 million (A$7.85 million).
Kraken representatives were not very happy with the outcome of the trial.
We believe these judgments will significantly hinder the growth of the Australian economy. We look forward to engaging constructively with policymakers and regulators as these rules are developed.
Kraken spokesperson
Despite this ruling, Australian regulators are focused on updating financial regulations to better support the growing digital asset sector.
