Cryptocurrencies became mainstream when Bitcoin prices exploded to nearly $20K in 2018. They crashed soon after, and are now at an all time high of nearly $40K (As of writing in January 2021).
For most people who jumped on the crypto bandwagon to make a quick buck, Bitcoins are seen similarly to stocks. You try to buy low and sell high. If you’re correct you make money, if you’re not, you lose money. Pretty straight forward.
But behind the scenes, cryptocurrencies are often seen as both the biggest necessity and threat to financial markets.
The how and why is far beyond the scope of this piece, but there is plenty of proof in the billions of dollars payment companies have thrown towards acquiring crypto projects or investing in their own crypto R&D. We’ll cover many of these topics in the future, but if you need to know about it today, look up Visa’s acquisitions or Facebook’s Libra project.
Anyway, as cryptocurrencies became widely adopted, the transaction amounts significantly increased. And when the U.S. government saw there was a lot of money involved, they decided they want part of the action through taxation, and passed laws to make that a reality.
The U.S. also decided its financial laws like the Bank Secrecy Act requiring financial institutions to report transactions larger than $10K to the government, applied to cryptocurrency companies.
So far so good. If you’re operating in the U.S. it’s only fair that companies abide by the law of the land. And the laws seem reasonable because we all know that if converting assets into a cryptos could reduce taxes or transparency, all of Wall Street is going to jump on that train.
So one Crypto trading company called BitMEX took the approach of: “No problem. We have no intention of paying U.S. taxes or abiding by your banking laws, so we won’t operate in the U.S.”
They incorporated in Seychelles and prevented people in the U.S. from using their platform. BitMEX was so strict about their no-U.S. policy that if they spotted an American IP Address trying to use their website, they would give users a 24 hour notice to withdraw his/her funds, or risk their entire fund being permanently frozen.
They went even further to separate themselves from the U.S. financial system and refused to accept any payments or deposits on their platform using the U.S. Dollar or any other fiat currencies backed by the Dollar (like the Yen or Euro). They only accepted Bitcoin, which users could use to trade for other cryptocurrencies such as Ethereum. It was kind of like Robinhood or any other stock trading app, but instead of buying stocks with U.S. Dollars, you bought different types of Cryptocurrencies using Bitcoin.
Fast forward to 2020 and BitMEX is one of the world’s largest Crypto trading platforms.
And even after taking all of these precautions to doing everything by the book, their founders are currently either arrested by the U.S. government, or wanted for criminal charges. You can read the full indictment here.
The claim is that BitMEX offered services to people in the U.S. despite claiming not to, and that those services were illegal.
Turns out people were using illicit methods to get around BitMEX’s U.S. bans: VPNs and other devices that confuse a website on the whereabouts of the user’s location.
It’s like if the DOJ sued Airlines for the September 11 attacks. Could the airlines have required invasive strip searches of every passenger immediately before boarding? Sure. But those airlines wouldn’t be in business very long, and terrorists would quickly find other ways to kill people.
The airlines were 100% compliant with security measures set by world governments, and the attacks still happened. The people who need to be prosecuted are the terrorist organizations or Saudi Arabia for their radical education system, not the airlines.
Same thing with BitMEX. They’ve done their best to follow the laws and prevent their users from breaking them. If a criminal circumvents that, the blame is on the criminal – not the platform.
Most stories from major publishers such as the New York Times focused on how BitMEX was used to launder money. Fucking stupid.
Criminals use legal methods to launder money every single day. But we don’t see managers from Deutsche Bank, Credit Suisse, The Bellagio, or the Clinton/Trump Foundations put in jail.
OK. Now we’re going to end this with some speculation. Put your tin foil hats on and strap in.
For the sake of argument let’s assume that BitMEX was knowingly conducting illegal activities in the U.S. and trying to get away with it. First of all that would be improbably dumb for their founding team that includes former Wall Street bankers who understand the U.S. financial system and the consequences of defying it.
But even if we put that aside, BitMEX isn’t the biggest crypto exchange in the U.S. Binance is, and they also accept USD and didn’t require any user verification. But no one at Binance has been prosecuted.
My wild speculation is that Binance allowed the U.S. government backdoor access to their users’ personal information the same way Facebook and Twitter did, while BitMEX said no.
Let me know what you think about this theory.