Crypto Trading Investors, It’s Not If or When: It’s CAN BitMex Exchange be Shut Down?
Within the world of cryptoassets, BitMEX is one of the biggest bodies within the field, and one of the largest bitcoin futures contracts exchanges across the globe. This is according to a report on international exchanges by CryptoCompare.
But over the course of 2018, we've seen the United States take on an increasingly firm approach towards cryptocurrency exchanges, especially as institutional investors begin to eye up the market. With this in mind, we take a look at the prospect that an exchange like BitMEX could potentially be put in the crosshairs of the US Federal government.
Marks Against BitMEX
While it has earned a strong reputation among users as a reliable and effective platform, which also provides a great deal of exposure to markets like the US. But while there are users out there that are singing its praises, there are some otherwise negative qualities out there that lose it marks.
For example, BitMEX has been in the firing line due to the more than vulnerable position, especially when considering its trading platform, which has been susceptible to frequent blackouts. While this on its own is a major complaint in itself, what makes them controversial is the fact that the exchange has been accused of using these blackouts as a way to win counter trades against rival exchanges.
It's alluded to that BitMEX has used this strategy in order to fund its proverbial ‘war chest' to kick start its own dedicated liquidation-based insurance fund. The CEO of BitMEX, Arthur Hayes, has since come forward in defense agaisnt these accusations.
It remains an effective trading platform for accomplished traders, and a well-known exchange for the trade of cryptocurrency derivatives and futures products. But therein lies the problem: it sells derivatives and futures, which come under the broader umbrella of securities, which are coming under closer examination within the US.
For international investors? That's not a real problem, but this is where the United States proves to be the exception to an unwritten global rule. Exchanges like BitMEX aren't technically allowed to sell these kinds of products to US citizens unless they're registered to do so according to the Securities and Exchange Commission (SEC). The blurriness of regulation could very well mean that the exchanges may require registration through the Commodities and Futures Trading Commission (CFTC) too.
Ok, so why does this make for a challenge for BitMEX? In order to obtain registration under the SEC & CFTC, cryptocurrency coin exchanges need to abide by stringent anti-money laundering policies such as checks as well as Know Your Customer (KYC). At the moment, BitMEX presents users with no prompts to validate users on these regulations.
While this is an exceptional net positive for cryptocurrency users, as they only need an email address in order to send cryptocurrencies to other users. So while this is a much-loved feature for users, it renders it a rather toxic prospect for more institutional investors, and an absolute no-go for the United States Government.
BitMEX – What can the US Government do
The fact that any cryptocurrency exchange that doesn't put these security measures to use places prospective investors in an excpetionally vulnerable position is concern enough to merit some scope of action from the US government and its regulatory bodies.
Specifically, the US Government has more than enough of the law on its side to take legal action against BitMEX if it chose to, and BitMEX has demonstrated more than enough vulnerability to leave it open to these same legal proceedings if it doesn't fall into compliance with US regulation.
Now while the US can act in a legal capacity. Considering how large the company is, and what it's involved in the trade of, the question is what kind of impact it would have if the government intervened?