The Australian organ of Binance is facing a lawsuit from a reputable regulator in the country over consumer protection issues. The Australian Securities and Investments Commission (ASIC), in a Monday blog post, revealed that it has sued Binance Australia Derivatives.
In the announcement, the regulator stated that the cryptocurrency exchange miscategorized more than 500 retail users as wholesale clients between July 2022 and April 2023. As announced, the misclassification denied the investors the legal privileges they are entitled to according to the Australian financial regulations.
Furthermore, according to the ASIC, some protections include access to a Product Disclosure Statement (PDS), a Target Market Determination (TMD), and internal dispute resolution processes. While providing deep insight into the allegation, the deputy chair of the ASIC, Sarah Court, chastised Binance over its compliance system.
Court described the exchange’s compliance effort as “woefully inadequate.” The executive added that Binance’s shortcomings have cost numerous users significant losses. She illustrated that the exchange failed to establish adequate protection for its clients.
Furthermore, ASIC listed numerous violations of its regulatory standard by the exchange, including the failure to implement efficient dispute resolution mechanisms. The Aussie regulator accused Binance of failing to train its workforce to comply with its financial laws.
Lastly, the ASIC said Binance erred in delivering efficient, honest, and fair services to the country’s citizens.
ASIC to Introduce New Regulatory Regime
Currently, the ASIC is clamping down on virtual asset service providers operating outside its regulatory framework. In September, ASIC Commissioner Alan Kirkland hinted that the agency is gearing up to introduce new laws that will mandate cryptocurrency exchanges acquire financial services licenses.
The commissioner indicated that the new licensing regime will extend beyond regulations related to cryptocurrency exchanges. Recently, the regulator has gone after exchanges that failed to comply with its directives.
Recall that in December, the ASIC fined Kraken operator Bit Trade for $5.1 million over compliance issues. As per a report by Binbits, the ASIC pursued a $12.8 million fine against the firm before a federal court ruled that $5.1 million as due fine.
Binbits reported that Bit Trade failed to register as a credit facility provider in Australia. Likewise, in the report, the ASIC accused the operator of Kraken of exposing investors to risky investments.