What happened
Recently, an Australian Federal Court issued judgment in a lawsuit brought by ASIC against Kraken regarding the availability of our Margin Extension product to Australian retail investors.
We believe our customers deserve access to innovative crypto products. We supported the Court’s move to seek clarification on our Margin Extension product, which we believed was fully compliant with local laws.
At the heart of the decision, the Court determined that when we extended the margin in fiat currency for customers it was (and is) subject to the Design and Distribution Obligations (DDO) of the Companies Act. However, this was not the case when we extended the margin to customers in cryptocurrency.
Why it matters
From a broader perspective, the Court’s decision is a victory for those of us who advocate for new laws to govern cryptocurrencies. While we are disappointed that the decision found that an aspect of Kraken’s margin product violated part of the Corporations Act, the judgment highlighted and clearly stated that existing Australian law is not effective in regulating cryptocurrencies.
This lack of clarity represents a deeply unsatisfactory situation for the Australian cryptocurrency industry. Australian investors and businesses in the sector continue to operate in a confusing and uncertain regulatory environment. This decision makes it clearer than ever that tailored cryptocurrency regulation is urgently needed.
Australia has taken important steps, including consulting on a draft approach that we broadly support, to establish a regulatory framework for cryptocurrencies. Unfortunately, despite the best efforts of local industry stakeholders and Treasury, legislation could be delayed beyond the end of the year. The industry risks missing out on the broader economic opportunities that cryptocurrency innovation presents.
Globally, we are seeing a race to build bespoke regulation for crypto assets. Clear and proportionate frameworks enable individuals to safely harness the potential of this transformative technology with appropriate regulatory protections.
What’s next?
We comply with legal and regulatory requirements in all jurisdictions in which we operate. Following the decision, we immediately took steps to ensure our customers can transact using a compliant offering. As such, the changes outlined below have been implemented in our Margin Extension product.
Kraken is committed to expanding its compliant product offering and is working on additional eligibility pathways for fiat margin extensions in the coming months.
Product Changes (as of August 30, 2024)
Margin trading with fiat currencies is now restricted to clients resident in Australia, unless they are wholesale investors (or “wholesale clients” as defined in the Corporations Act 2001). These restrictions do not affect margin extensions when trading with crypto assets (see table below).
| Types of pairs | Examples of pairs | Buy to open a long position* | Sell to open a short position* |
| Cryptocurrencies vs. Cryptocurrencies | Bitcoin/ETH, USDT/BTC | Restrictions do not apply | Restrictions do not apply |
| Cryptocurrencies vs. Fiat Currency | BTC/AUD, USDT/USD | Restrictions apply | Restrictions do not apply |
* There are no restrictions on closing or reducing existing margin positions. Clients will still be allowed to enter into transactions to buy back existing short positions or sell existing long positions.
How do I qualify as a wholesale investor?
For Australian clients to be eligible to trade on margin with fiat currencies, they will need to demonstrate that they qualify as one of the following wholesale investor categories:
- a natural person or high net worth controlled entity;
- a professional investor;
- a large company (by size of workforce); or
- an entity related to a wholesale investor.
More details on this process and the categories listed above can be found in this support article and customers who believe they are eligible should complete this form to begin the process.
These materials are provided for general informational purposes only and do not constitute investment advice, or a recommendation or solicitation to buy, sell, stake, or hold any cryptoassets, or to participate in any specific trading strategy. Kraken makes no representations or warranties, express or implied, as to the accuracy, completeness, timeliness, suitability, or validity of this information and will not be liable for any errors, omissions, or delays in this information or for any losses, injuries, or damages resulting from the display or use of it. Kraken does not and will not work to increase or decrease the price of any particular cryptoasset that it makes available. Certain crypto products and markets are unregulated and you may not be protected by government compensation and/or regulatory protection schemes. The unpredictable nature of the cryptoasset markets may result in the loss of funds. Tax may be payable on any return and/or increase in the value of your crypto assets and you should seek independent advice on your tax position. Geographic restrictions may apply. Availability of margin trading services is subject to certain limitations and eligibility criteria. Margin trading carries an element of risk and may not be suitable for everyone. Read Kraken Margin Disclosure Statement to find out more.
