The charges against the BitMEX exchange signal the message from US authorities that the cryptocurrency business must operate under the rules of the existing financial system. This view was voiced for ForkLog by Anatoly Knyazev, co-founder of EXANTE.
“The US authorities have made it clear that the entire cryptocurrency sector, including its grey areas, is under their control and from now on it will play by their rules,” he said.
He believes that compared with the BitMEX investigation by the New York prosecutor’s office into Bitfinex and Tether, it “looks lenient.”
However, after the charges against BitMEX the risk for Tether holders has substantially increased and the case could take a different turn, Knyazev believes:
“The signal is obvious — trading without KYC on normal exchanges will not happen. Regulation for crypto exchanges will be comparable to that of ordinary financial companies in Europe and the United States.”
Long-term, these events will not affect the price of bitcoin, the EXANTE co-founder believes. He says bitcoin will revert to its normal level unless a force majeure occurs such as a shutdown and withdrawal of funds from BitMEX.
“Thanks to enormous liquidity and low fees, the exchange was the number one platform for many arbitrageurs. In this case, arbitrageurs will be stuck and the liquidity balance will be disrupted. Market participants will perceive this extremely negatively and the probability of a chain reaction with a collapse in BTC quotes will rise,” Knyazev says.
The expert noted that after the BitMEX situation, crypto exchanges participants will have to “either bow to the rules or move into DeFi.” However, the realm of decentralised finance is not entirely immune to potential claims by American regulators.
“It is important to understand that BitMEX is not accused of a specific incident, but of violating a set of rules. Any business in the world that has or could have clients from the US, which is developed or marketed in the US, may fall under these rules,” said Knyazev.
For example, if the US Department of Justice takes on a decentralized exchange Uniswap, regulators “will not seize smart contracts, but there are always people who develop user applications, apps for app stores, or engage in marketing,” the expert said.
Separately, Anatoly Knyazev draws attention to the fact that authorities have brought charges against individuals.
“Banks are often at the centre of AML scandals. They are obliged to pay fines, but individuals from top management are usually not defendants. Orwell comes to mind, who wrote that ‘all are equal before the law, but some are more equal than others.’ It seems that now the banks are the ‘more equal,’” concluded Knyazev.
Earlier, the U.S. Commodity Futures Trading Commission (CFTC) filed suit against BitMEX and its owners, including co-founder and CEO Arthur Hayes. The regulator accused them of operating an unregistered trading platform and violating CFTC rules.
Additionally, the U.S. Department of Justice charged the exchange’s leadership with violations of the Bank Secrecy Act.
Against this backdrop, BitMEX open interest has fallen to below its yearly minimum.
Subscribe to ForkLog news on Telegram: ForkLog Feed — the full stream of news, ForkLog — the most important news and polls.