Crypto Crackdown Down Under: ASIC’s Pyrrhic Victory against Kraken

At the end
of August, the court agreed with the Australian Securities and Investment
Commission (ASIC), confirming that the cryptocurrency exchange Kraken
violated local regulations by offering margin products to retail clients.
However, the company operating under the brand Bit Trade Pty Ltd claims that
the issue is more complex.

Kraken Margin Trading
Ruling Exposes Australia’s Crypto Regulation Gap

The ruling,
which centered on Kraken’s Margin Extension product, determined that margin
trading extended in fiat currency to retail investors falls
under the Design and Distribution Obligations (DDO) of the Corporations Act.
However, the court found that the margin extended in cryptocurrency is not subject
to the same regulations.

While ASIC
hailed the decision as a victory, Kraken argues it exposes significant gaps in
the country’s approach to crypto regulation.

“This
ruling makes it clearer than ever that bespoke crypto regulation is urgently
needed,” Kraken commented in
the new blog post. “Australian crypto investors and businesses
continue to operate in a confusing and uncertain regulatory environment.”

Understanding ASIC’s Recent Judgment: The Need for a Clear Crypto Regulatory Framework in AustraliaRead more: https://t.co/9NhoiC82ii#ASIC #CryptoRegulation #Kraken #MarginTrading #Australia pic.twitter.com/h826lWyLTv

— sinyalbak (@sinyalbak) September 9, 2024

The
judgment comes as Australia lags behind other jurisdictions in implementing
comprehensive crypto regulations. Despite ongoing consultations and efforts by
the Treasury, legislation could be delayed beyond the end of the year,
potentially hampering the industry’s growth and innovation.

In the past, the
exchange has experienced regulatory issues in other regions of the world, including in the US. Almost
a year ago, it was sued by The Securities and Exchange Commission (SEC) for
illegally operating an unregistered securities exchange, broker, dealer, and
clearing agency.

Kraken Changes Margin Products

In response
to the newest Australian court ruling, Kraken has implemented immediate changes
to its Margin Extension product. Margin trading with fiat is now restricted for
Australian residents unless they qualify as Wholesale Investors under the
Corporations Act. These restrictions do not apply to margin extensions when
trading with crypto assets (including pairs like BTC/ETH or BTC/USDT).

“We
comply with legal and regulatory requirements in all jurisdictions in which we
operate,” Kraken
added. “Kraken is committed to expanding its compliant product offering
and is working on additional eligibility pathways for fiat margin extensions in
the coming months.”

The case
highlights the global race to provide tailored regulation for crypto assets,
with countries like the United States, United Kingdom, and Singapore making
strides in this area. Clear and proportionate frameworks are seen as crucial
for allowing individuals to safely harness the potential of blockchain
technology while ensuring appropriate regulatory protections.

This article was written by Damian Chmiel at www.financemagnates.com.
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