This article comes fromBloomberg, Original Author: Benjamin Robertson Gregor Stuart Hunter
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Odaily translator |
The U.S. Commodity Futures Trading Commission (CFTC) is investigating cryptocurrency exchange BitMEX, according to people familiar with the matter. BitMEX is a popular platform in Asia that allows people to make big bets with little money, commonly known as leveraged trading.
“The CFTC’s months-long investigation has focused on whether BitMEX violated regulations by allowing U.S. users to trade without registering with the CFTC,” one person, speaking on condition of anonymity, said of the undisclosed probe. Regulators view virtual currencies such as bitcoin as commodities and believe they have jurisdiction over futures and other derivatives based on such assets.
Investigations are ongoing, and CFTC investigations typically do not result in allegations of wrongdoing. The CFTC declined to comment.
A spokesperson for BitMEX also said: In accordance with company policy, HDR Global Trading Limited, the owner of BitMEX, does not comment on any government or regulatory investigations or media-related reports, and we will not comment on this report.
BitMEX CEO Arthur Hayes said in an interview in January this year that anyone who violates the regulations that prohibit US residents and citizens from trading on the platform will be removed from BitMEX. However, Hayes also revealed that customers may be hiding their true location by using a virtual private network (VPN), specifically, by configuring their computer with an Internet Protocol address for a country in which BitMEX allows transactions, thus tricking the filter.
While multiple U.S. agencies claim some jurisdiction over digital currencies, the CFTC’s remit is largely limited to crypto derivatives, fraud and manipulation in spot markets. Nonetheless, the CFTC, as the main U.S. swaps regulator, has established its dominance in regulating virtual currencies and will therefore prosecute domestic and foreign crypto firms when they involve U.S. users for alleged violations of its derivatives regulations.
This is not a dead letter. In March, Marshall Islands-based 1pool Ltd. finally agreed to pay nearly $1 million to settle the lawsuit after it was accused by the CFTC of violating regulations by offering contracts backed by bitcoin. In that case, the CFTC accused the firm of illegally offering bitcoin-margined retail commodity trades to U.S. customers and improperly acting as a broker for those customers by accepting bitcoin as collateral.
BitMEX is registered in Seychelles, but is headquartered in Hong Kong and has an office in San Francisco.
Hayes, one of the firms three co-founders, was a former equity trader at Citigroup Inc. and was active at crypto conferences around the world. Another co-founder, Samuel Reed, has a programming background. The third is Ben Delo. According to LinkedIn information, he was a vice president in the Hong Kong office of JPMorgan Chase Co., where Delo developed a high-frequency trading system.
The CFTC investigation into BitMEX comes as global authorities intensify scrutiny of the largely unregulated cryptocurrency market, which has been plagued by fraud, allegations of price manipulation and a plunge in the value of many heavily traded tokens . On July 11, U.S. President Donald Trump tweeted: I dont like Bitcoin and other cryptocurrencies, they are not money, their value is highly volatile, and they come out of thin air.
The rules for bitcoin trading vary from country to country, and BitMEX posted a notice on its official website stating that citizens or residents of the United States or the Canadian province of Quebec are not allowed to use the platform under its terms of service. Some traders have complained on social media that they have been turned away from BitMEX due to suspicion of being from the United States.
Founded in January 2014, BitMEX is typically one of the largest exchanges by trading volume, according to CoinMarketCap.com. Its early pitch was a referral system that gave a portion of trading fees to clients who referred new traders to the platform. BitMEX also offers futures-like contracts that allow investors to bet on the price direction of various digital currencies such as Bitcoin and Ethereum with a leverage ratio of 100 to 1.
There are many people who are popular, and encrypted exchanges are no exception. BitMEX will face criticism from all sides, including New York University economist Nouriel Roubini, known as Doctor Doom. In a recent article, Roubini argued that BitMEX, and all similar crypto exchanges, allow systematic illegal activity. He said BitMEX insiders shared with him information that the exchange turned a blind eye to money laundering by terrorists and criminals from Russia, Iran and elsewhere, and profited from those transactions.
Not just for individual exchanges, but the wider industry faces some potential setbacks: Earlier this month, the UK’s Financial Conduct Authority proposed a ban on retail crypto derivatives, warning consumers that There is no reliable basis for valuation of digital tokens.
