Kraken, the cryptocurrency exchange, has made adjustments to its margin trading product following a ruling by the Federal Court of Australia. The court determined that Kraken’s fiat margin extensions are subject to regulatory obligations, while cryptocurrency margin extensions are not.
Kraken acknowledged the decision but emphasized the urgent need for clearer cryptocurrency regulations in Australia. In response, the exchange has restricted fiat margin trading to wholesale investors, while cryptocurrency margin trading remains unaffected.
Kraken’s Margin Product Faces Legal Adjustments Amid Regulatory Concerns
In response to a recent ruling by the Australian Securities and Investments Commission (ASIC), Kraken has made changes to its Margin Extension product. The Federal Court of Australia ruled that fiat margin extensions fall under the Design and Distribution Obligations (DDO) of the Corporations Act, but cryptocurrency margin extensions do not.
Kraken stated, “At the core of the ruling, the court determined that when we extended fiat margin to clients, it was subject to the DDO requirements of the Corporations Act.” However, the exchange highlighted, “This was not the case when we extended the margin to clients in cryptocurrencies.”
While acknowledging the court’s decision, Kraken stressed its broader implications for cryptocurrency regulation in Australia. According to Kraken, “Considering the bigger picture, the court’s decision was a victory for those of us advocating for new laws to regulate cryptocurrencies.
Although we are disappointed that the ruling found one aspect of Kraken’s margin product violated part of the Corporations Act, the judgment highlighted the inadequacy of existing Australian legislation in regulating cryptocurrencies.”
Call for Clearer Regulations
Kraken believes the ruling underscores the urgent need for specific, clear regulations for the cryptocurrency industry in Australia. The current legal framework leaves both investors and companies navigating uncertain legal terrain, potentially stifling innovation.
In response to the court’s decision, Kraken implemented immediate changes to comply with the legal requirements.
The exchange clarified, “Fiat margin trading is now restricted for clients residing in Australia, unless they qualify as wholesale investors, as defined by the Corporations Act 2001. These restrictions do not affect margin extensions when trading crypto assets.”
These adjustments mean that while fiat margin trading is now limited to wholesale investors, cryptocurrency margin trading continues without restriction. Kraken reaffirmed its commitment to compliance in all jurisdictions in which it operates and urged Australian regulators to provide clearer guidelines for the cryptocurrency industry.
As Kraken navigates these legal changes, the focus remains on finding a regulatory balance that encourages innovation while ensuring compliance.