- ASIC is taking legal action against Bit Trade for failing to establish a Target Market Determination (TMD) for its Marhin Extension product.
- Margin Extension allows users to borrow credit against their collateral up to 5x its value.
- A TMD requires crypto firms in Australia to outline a target demographic for their products for better investment education.
The Australian Securities and Investments Commission (ASIC), has taken legal action against Bit Trade Pty Limited, the operator of the Kraken cryptocurrency exchange in Australia.
ASIC alleges that Bit Trade violated regulatory obligations by not creating a target market determination (TMD) for its margin trading product offered to Australian customers on the Kraken platform. A TMD requires digital asset service providers to outline a target consumer demographic for which their products are ideal. The Bit Trade product in question, known as “Margin Extension,” provides credit to users for trading specific crypto assets, allowing them up to 5x leverage on their collateral.
According to ASIC, since introducing design and distribution obligations in October 2021, at least 1160 Australian customers have utilized Margin Extension, resulting in a collective loss of around $12.95 million. Despite receiving notifications of concerns from ASIC in June 2022, Bit Trade continued offering the product without establishing a TMD.
This legal action underscores ASIC’s commitment to regulating the cryptocurrency industry. It emphasizes the significance of complying with design and distribution obligations to ensure consumer protection and responsible financial product distribution.