Strong regulatory moves show crypto firms need to comply like regular banks

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The BitMEX case, in which several executives were charged for violating the Bank Secrecy Act, has shown that crypto businesses must work according to the rules of the existing financial system, as far as the U.S. is concerned. The U.S. authorities have made it clear that the crypto sector, including its "gray" alleys, is now under government regulation and will have to play by the rules.

The BitMEX crypto exchange remains one of the largest venues that hasn’t required KYC. Another major exchange, Binance, hasn’t imposed any documentation requirements for the trades under 2 BTC. Now, it will most likely introduce mandatory KYC, regardless of volumes.

Compared to the BitMEX case, the sluggish action of the New York Attorney Office against Bitfinex and Tether seems pretty liberal. That said, after the BitMEX events the risk has grown for Tether holders and there may be new repercussions. The authorities’ message is loud and clear. There will be no trades at decent exchanges without KYC. The control of crypto exchanges will resemble that of regular financial companies in Europe and the U.S..

BTC has played back and resumed growth. BitMEX is a big player but not the whole industry. Another issue for crypto exchanges to consider is force majeure.

An example of such force majeure would be termination of BitMEX operations and cash withdrawals. Due to huge liquidity and low commissions, the exchange has been a No. 1 platform for many arbitrageurs. If the worst came to the worst, they would get stuck and the balance of liquidity would be compromised. This would provide a negative impulse to market players and might result in a domino effect and the BTC collapse.

Given the BitMEX situation, it’s obvious that crypto exchange players will either have to comply or switch to DeFi. That said, DeFi may cause potential troubles of its own. BSA (Bank Secrecy Act) is a general provision that applies to both financial companies and individuals should crypto exchange be their occupation rather than a one-time operation.

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Cryptocurrencies Blockchain AML Risk Digital payments