That’s per anonymous sources close to the situation, Bloomberg reported on July 19th. Those persons said at issue for the U.S. Commodities Futures Trading Commission (CFTC) is whether BitMEX has effectively stopped Americans from using its venue since the exchange is not registered with the Commission.
Both the CFTC and BitMEX declined to comment on the report.
According to the exchange’s terms of service, Americans are not allowed to use its platform — a rule that’s officially been in place for the last few years. The exchange itself is registered out of Eden Island in Seychelles. Notably, bitcoin trading pundit Tone Vays had his account axed by BitMEX last fall “on suspicion of being a US Citizen,” the trader said at the time.
However, the purported CFTC investigation — which has reportedly been underway for months and remains ongoing — doesn’t necessarily mean much for now.
On the news, Compound General Counsel and popular cryptoverse legal commentator Jake Chervinsky said the work appeared routine and such “investigations often result in no charges at all.”
Stop freaking out over a routine government investigation.
There's a reason these things are supposed to be confidential: the public overreacts & assumes the worst, while in reality, investigations often result in no charges at all. CFTC asking questions is normal & expected. https://t.co/9B7In21VrU
— Jake Chervinsky (@jchervinsky) July 19, 2019
Conversely, The Block Director of Research Larry Cermak saw in the news another gust of rearing tension in America’s nook of the cryptoeconomy, noting that prominent cryptocurrency platforms are increasingly clamping down on aspects of American crypto trading.
This is getting quite serious. Let's summarize:
– Both BitMEX and Bitfinex are now investigated for servicing U.S. customers
– Bittrex and Poloniex started to geo-block tokens from the U.S.
– Binance pulled crypto-to-crypto trading out of the U.S. completely
— Larry Cermak (@lawmaster) July 19, 2019
Whatever ends up happening, the new Bloomberg report comes after the South China Morning Post reported earlier this year how BitMEX had undertaken a spate of U.S. and Quebecois account deletions after Quebec’s Autorité des marchés financiers (AMF) told the exchange it was not licensed to operate in the Canadian state.
“We informed this company that its activities were illegal,” an AMF spokesperson said.
Of course, it’s no secret that some traders in the space have turned to virtual private networks (VPNs) in an attempt to bypass BitMEX’s blacklisted countries. However, those traders are doing so with no guarantees about their accounts staying open.
Why the CFTC?
Notably, the CFTC is among several federal watchdogs that consider cryptocurrencies directly within their jurisdiction, with the result being a somewhat confusing regulatory landscape in America. For example, in cryptocurrencies the Internal Revenue Service (IRS) perceives property, the Securities and Exchange Commission mostly perceives securities, and the CFTC perceives commodities
Indeed, for the CFTC’s part, the agency won a ruling in the U.S. District Court for the District of Massachusetts last fall that indicated virtual currencies were within the Commission’s regulatory purview.
Last spring, the CFTC made waves in the cryptoverse when news broke that it was collaborating with the U.S. Department of Justice on an investigation into market manipulation practices in the fledgling cryptoeconomy. Weeks later, the Commission announced it was investigating whether traders were manipulating prices on the cryptocurrency exchanges of Bitstamp, Coinbase, itBit, and Kraken.
Libra a Security and Not a Commodity? Aye, Says Former CFTC Chairman
With Facebook enduring tense congressional hearings this week over their Libra stablecoin plans, swathes of cryptoeconomy stakeholders are grappling deeply with what the token could and will be.
According to former CFTC Chairman Gary Gensler, who testified in one of those aforementioned congressional hearings, the Libra project isn’t structured like a commodity but rather like a security. As he explained in his written testimony:
“[T]he Libra Reserve, in essence, is a pooled investment vehicle that should at a minimum, be regulated by the Securities and Exchange Commission (SEC), with the Libra Association registering as an investment advisor.”
To be sure, it will be interesting to see if the current leadership at the CFTC come around to the same opinion. Only time will tell.