Kraken Raises Alarm Over Regulatory Ambiguity in Australia
Cryptocurrency exchange Kraken has voiced serious concerns regarding the unclear regulatory landscape in Australia, especially following a recent Federal Court ruling unfavorable to its fiat margin trading product. In a blog post, Kraken highlighted that Australian crypto businesses and investors are navigating a “confusing and uncertain regulatory environment,” underscoring the need for clearer guidelines.
The exchange stressed that the court’s decision reflects the broader issue of regulatory ambiguity surrounding cryptocurrency operations in the country. Kraken articulated that this ruling highlights the urgent need for tailored cryptocurrency regulations, asserting, “This ruling makes it clearer than ever that bespoke crypto regulation is urgently needed.”
ASIC’s Victory Against Kraken’s Subsidiary Bit Trade
Last year, the Australian Securities and Investments Commission (ASIC) initiated civil proceedings against Bit Trade, a subsidiary of Kraken’s parent company, Payward Incorporated. ASIC accused Bit Trade of not fulfilling legal obligations, specifically failing to conduct a target market determination prior to offering its margin trading product to consumers.
Additionally, Bit Trade’s product, which allowed customers an extension of 5x credit based on the asset’s value, was found to be operating in violation of regulations by acting as an unlicensed credit facility. The Federal Court ruled against Bit Trade in late August, determining that the platform had breached section s994B(2) of Australia’s Corporations Act since October 2021.
ASIC Deputy Chair Sarah Court emphasized that the ruling ensures compliance with regulatory requirements to protect consumers, stating, “It is a legal requirement for financial products to be distributed to consumers appropriately. Consumers should receive the full protection of the law when dealing in crypto-asset products.”
Impact on Kraken’s Operations in Australia
As a direct result of the court ruling, Kraken’s fiat margin trading services in Australia are now restricted to wholesale clients, while its crypto margin trading services remain unaffected. Kraken, which acquired Bit Trade in 2020 to enhance its digital asset services in Australia, faces significant operational limitations due to these regulatory challenges.
Growth of Australia’s Cryptocurrency Market
Despite the regulatory challenges, the cryptocurrency market in Australia has experienced substantial growth in recent years. Current reports indicate that 17% of Australians own cryptocurrency, which surpasses the global average of 15%. However, this growth comes amidst heightened scrutiny from regulators. For instance, in May of last year, Binance Australia informed customers that they would lose access to Australian dollar transactions due to actions taken by their third-party service provider.
Furthermore, in July, ASIC conducted searches at Binance Australia’s offices, signaling a crackdown on compliance within the sector. In October, the Australian government introduced a proposal aimed at subjecting digital asset platforms to the same regulatory framework as other financial service providers, indicating a potential shift in how cryptocurrencies will be governed in the future.