Australia Hits Kraken's Crypto Exchange Operator With $5.1M Fine for Unlawful Credit

Kraken’s Australian operator, Bit Trade, has been issued a fine of A$8 million (US$5.1 million).

On Thursday, the Australian Securities and Investments Commission (ASIC) announced that the Federal Court had ordered Bit Trade to pay the penalty for unlawfully issuing a credit facility through the company’s margin trading product to over 1,100 customers without adequate compliance measures.

Bit Trade allegedly failed to adhere to regulatory requirements in assessing the suitability of its margin trading product for its customers, leading to customer losses exceeding $5 million.

ASIC revealed that Bit Trade’s margin extension product allowed customers to borrow funds, repayable in either crypto or fiat, but failed to ensure that the product matched the customers' financial circumstances. Over $7 million in fees and interest were charged to customers during this period.

"Bit Trade issued its margin extension product to over 1,100 Australians who were charged fees and interest of more than US$7 million without considering if the product was appropriate for them," ASIC said in a statement.

The Federal Court classified the product as a credit facility since it provided margin extensions in national currencies. Bit Trade was obligated to produce a target market determination document to outline the intended consumer base. ASIC claimed that the absence of this document represented a breach of the regulations.

In response, Kraken said it was disappointed with the outcome of the case, with a spokesperson stating, "We believe these rulings significantly hamper growth in the Australian economy. We look forward to engaging constructively with policymakers and regulators as these rules are developed."

Last week, ASIC said it was initiating a significant update to its guidance for digital asset regulation, signalling a major step toward integrating cryptocurrencies into the country’s financial regulatory framework.

ASIC’s expanded guidance includes 13 practical examples demonstrating how the country’s financial product definitions apply to digital assets, including wrapped tokens and stablecoins. The proposal emphasizes that digital asset businesses will need to adhere to the same licensing standards as traditional securities platforms.