This is big news. What is interesting about this to me is that unlike many crypocurrency exchanges, bitmex only deals in derivatives. What this means for them is that you can only deposit BTC, and only take out BTC. So they do not give anyone USD, and they do not deposit or withdraw money from anyone's bank.
It is also, by far, the best way to gain leverage in cryptocurrency products, with lower fees, great security, and even a wonderful blog and transparency.
I'm interested to what extent the government believes the BSA needs to apply to this, since a different area of the government (IRS) decided BTC was not even a currency. Of course, all of the relevant governing bodies (of which there are many in the US) can all choose their own designations, which may result in apparent inconsistencies, but I wonder to what extent they were warned about this beforehand.
What is also interesting is that Bitmex did not allow US residents to use their exchange via blocking US IP addresses and asking for country of residence, aside from perhaps the first few months. Some US residents would use a VPN and use it instead, but they (the client) would have to lie to Bitmex in doing so. It appears that's what the argument here is - that they did a poor job, knowingly so, of stopping US residents from using their services. BitMex was, over time, implementing tougher KYC, but currently it's not required by all of their clients for a few more months.
Not doing any KYC/AML with that kind of volumes can't really be seen as competent by any standards. Of course customers love it when KYC procedures are not needed, but from their own perspective they should have tried at least some basic covering of their own ass by investing in compliance.
From the US point of view. The problem is that US gov is expanding their laws as crossbordering. E.g. if I don't work with american people at all and do service with less regulations requirements I can be still charged and extradited to US prison because "SOME Americans could lie both to me AND American gov and use fake data and VPNs". That's a nonsense for today global world and slowing down lots of developing countries. Current world should revise extradition laws and US intervention in non-US citizens businesses.
KYC/AML is a nonsense for virtual-currency exchange, it is nominal and trifling irritation for the end user, since you can use simply use another persons "verified" account as a proxy-account for your trades as I expect many do for the purposes of privacy.
Whether KYC/AML laws make sense is totally beside the point. That's like saying because cannabis being illegal makes no sense, therefore it makes sense to sell cannabis publicly in large quantities and not comply with any laws.
I understand this, but what I mean by this is that the infringement then is logically also small since the quantifiable infraction is in reality small compared to those whom the officials deem to be compliant.
They are charging the owners of a non American company that banned most Americans with violating US banking laws. Even tho Bitmex never used a US bank, is not a US company and only used bitcoin for transactions
While the US does love exporting our/their rule of law outside, the internet creates an interesting problem with jurisdiction. By serving customers in the US, have they subjected themselves to US law?[a] Many times before, the courts have found that an American company doing business in State X meant they could be sued there. But they’ve also found otherwise. It’s an interesting question that doesn’t seem to have a clear answer.
[a] When visiting another country, it’s very clear you’re subjecting yourself to their laws (I can’t visit France and expect only US laws will apply to me), but the internet (a global system) poses a problem.
They did there job and did it well. What users were happy? I thought US govt was saving as from bitmex? The US govt criminals charges against the owners is a disgusting overreach
Can you provide an example of a typical trade that was done on BitMEX for someone who understands what derivative means (from a few of the good books that came out following 2008 and later) but is generally unfamiliar with that world?
There's a lot of depth in it, but here's my version for laymen. I was a derivatives trader in the financial markets and also did some work in crypto exchanges.
Imagine someone offers you a deal where instead of buying stocks, you agree with someone to pay you the difference between the price of a stock today and whenever you decide to exit the deal. PnL should look a lot like whatever the stock did over the period.
Add to this that of course when the trade starts, it's worth about zero to either side. But there's a chance you're gonna lose money, so the exchange wants you to put up some money. Not the entire amount that the shares cost, because you probably won't lose that much. And we can adjust the margin according to how the market moves.
So you can then get a much larger exposure than if you just bought the stock with the same amount of cash.
Now add to this a minor wrinkle, that is you don't use the cash dollars to buy the bet, you actually use the stock. And if you win, you get more stock.
There are great deteails and write-ups on Bitmex's website such as https://www.bitmex.com/app/perpetualContractsGuide, but in general it is basically either futures or a type of swap contract, but all based in BTC.
It is also, by far, the best way to gain leverage in cryptocurrency products, with lower fees, great security, and even a wonderful blog and transparency.
I'm interested to what extent the government believes the BSA needs to apply to this, since a different area of the government (IRS) decided BTC was not even a currency. Of course, all of the relevant governing bodies (of which there are many in the US) can all choose their own designations, which may result in apparent inconsistencies, but I wonder to what extent they were warned about this beforehand.
What is also interesting is that Bitmex did not allow US residents to use their exchange via blocking US IP addresses and asking for country of residence, aside from perhaps the first few months. Some US residents would use a VPN and use it instead, but they (the client) would have to lie to Bitmex in doing so. It appears that's what the argument here is - that they did a poor job, knowingly so, of stopping US residents from using their services. BitMex was, over time, implementing tougher KYC, but currently it's not required by all of their clients for a few more months.