The US Commodity Futures Trading Commission is going to investigate cryptocurrency derivatives exchange BitMEX, according to sources cited by Bloomberg.
The regulator would focus on whether or not BitMEX, a Seychelles-based firm, has been offering services to the American citizens. The exchange lets people make big bets on the cryptocurrencies with as much as 100-times margins. The CFTC considers cryptocurrencies like bitcoin as commodities, which brings companies like BitMEX – that offers futures and other crypto-based derivatives trading services – under its jurisdiction.
Bloomberg reached BiMEX for further clarification and received the statement from the firm’s spokesperson as follows:
“HDR Global Trading Limited, owner of BitMEX, as a matter of company policy, does not comment on any media reports about inquiries or investigations by government agencies or regulators and we have no comment on this report.”
Americans Cannot Access BitMEX Until They Can
The alleged investigation follows BitMEX’s removal from the North American markets. In 2018, Canadian regulator Autorité des marchés financiers (AMF) sent a letter to the crypto derivative firm over its unlicensed status in the region. But, according to BitMEX’s press representative Wachsman, the firm had started closing the accounts of all its US and Canada-based customers from as back as 2015.
“BitMEX has banned all US traders since 2015, and has been proactively closing accounts since guidance was obtained by US regulators, in particular the Commodities and Futures Trading Commission (CFTC),” Wachsman’s Joe Coufal told the South China Morning Post.
While Americans cannot access BitMEX through an internet-based protocol based out of the US, they can still use the cryptocurrency exchange using a virtual private network tool. Such software helps the users mask their original locations by providing internet protocol (IP) addresses of other countries. A company typically relies on databases which contain a list of fake IPs to detect whether or not their users are using proxies.
“BitMEX has always retained the right to close any accounts and to liquidate any open positions were trading participants has given false representations as to their location or place of residence,” explained Coufal.
In November 2018, BitMEX banned the account of famous cryptocurrency analyst and trader Tony Vays. The exchange alleged that Vays, a US citizen, provided them fake identification details before liquidating his positions. In his response, the trader said BitMEX wrongfully closed his account since he is not an American.
“Just got my BitMEXdotcom account terminated on suspicion of being a US Citizen,” Vays tweeted. “Anyone else finds the timing of this odd?”
The CFTC’s investigation closely follows Treasury Secretary Steven Mnuchin’s warning of an aggressive crackdown on bitcoin firms operating in the US. Earlier this week, the White House staff called bitcoin “a national security threat.”