BitMex Shutting Down U.S. Accounts?


Developments this week highlight some issues that cryptocurrency traders should know about related to how international exchanges work, and how American regulations apply.


News from the cryptocurrency front includes warnings that Hong Kong based BitMex is quietly shutting down some U.S. investors’ accounts. News today at CryptoPotato shows a tweet from Tone Vays talking about how his BitMex account was terminated recently:

“Anyone else find the timing of this odd?” Vays wrote. “The 900+ affiliates that accounted for half my income r gone going forward.”

A broad consensus in parts of the cryptocurrency world is that BitMex previously ignored illicit use by American investors, but is now cracking down due to concerns about SEC regulations.

Experts cite an incident a couple of months ago where another exchange called 1Broker based in the Marshall Islands was suddenly shut down by the SEC. The Cryptopotato coverage shows legal documents relating to this enforcement activity.

What’s behind the SEC’s scrutiny?

At the heart of the matter is something called KYC requirements. KYC stands for “know your customer” and the issue of KYC requirements really illustrates the conflict here.

Coin offerings like zCash and Monero are consider “darknet” cryptocurrency offerings. The way they operate is that the holder’s identity is anonymous. But this inherently runs afoul of the U.S. regulations because KYC requirements make user identity information mandatory.

In some ways, it’s a return to that whole debate that we had over the silk road marketplace years ago, and the ways that government surveillance work applies to cryptocurrency, which is inherently libertarian in its nature and design.

Controls on money are highly written into the regulatory process, and when you look at how international exchanges are set up, in there’s really no compromise to be made. That has traders looking warily at the risks of using an exchange like BitMex or getting into darknet cryptocurrencies or wading into anything that’s not specifically SEC approved.

It’s also another reason that traders are hopeful about the release of Bitcoin ETFs, because they will be a highly user-friendly and convenient way to invest in cryptocurrency without worrying about the nuts and bolts of the process.

Keep an eye out as we continue to report on SEC policy and activity moving forward that can affect cryptocurrency markets.