Hong Kong-Based Bitcoin Derivatives Exchange Bitmex Forced to Stop Providing “Illegal” Trading Services to American and Quebecois Customers

Bitmex, a Hong Kong-based Bitcoin derivatives exchange popular for allowing 100X leveraged bets, has deactivated the trading accounts of clients from the US and the Canadian province of Quebec, The South China Morning Post (SCMP) reports.

The move has likely been made in response to increased regulatory pressure being exerted from both jurisdictions.

Bitmex is registered in the Seychelles.

Bitmex has imposed similar restrictions against clients from North Korea, Iran, Syria, Cuba, Sudan in the Crimea, likely in order to not to run afoul of global anti-money laundering and anti-terrorist financing laws (AML/CFT)

Quebec financial regulator the Autorité des marchés financiers (AMF) reportedly contacted Bitmex recently by letter advising them to stop serving customers from Quebec because the exchange is not authorized to do so in the province.

Regarding the advisory, the AMF’s director of media relations told the Post:

“BitMEX is not registered with the AMF and is therefore not authorised to have activities in the province of Quebec…We informed this company that its activities were illegal.”

In response to its notice, says the AMF spokesperson, Bitmex immediately closed all Quebec customer accounts.

On the home page of Bitmex, the company has posted the following announcement:

In accordance with Section 1.4 of our Terms of Service:

  • Persons that are located in or a resident of the United States of America or Québec (Canada)are prohibited from holding positions or entering into contracts at BitMEX.
  • Persons that are located in or a resident of Cuba, Crimea and Sevastopol, Iran, Syria, North Korea and Sudan, or any other jurisdiction where the services offered by BitMEX are restricted, are prohibited from holding positions or entering into contracts at BitMEX.
  • BitMEX reserves the right to immediately close the accounts and to liquidate the open positions of persons determined to have breached our Terms of Service.

The US Securities and Exchange Commission (SEC) would not comment on the matter, nor would Bitmex founder, Arthur Hayes.

2018 was characterized by an unprecedented crackdown on fraudulent activities involving cryptocurrencies by multiple North American justice agencies

These actions include “Operation Cryptosweep”, an joint-investigative/ enforcement push by 40 North American state and provincial regulators and law enforcement agencies that began last May.

Exchanges have also come under increased scrutiny in the US.

Under US securities laws, businesses facilitating crypto trades must register as securities exchanges or receive an exemption. It is not believed that Bitmex has done so.

A source to the SCMP, speaking on the condition of anonymity, told the outlet that traders in Asia comprise the majority of Bitmex customers, though the US is another “major” market.

“Several” other sources speaking on condition of anonymity told SCMP that US-based traders account for 7% of trades on Bitmex.

Bitmex reports that close to a billion dollars in Bitcoin-derivatives trades take place on the exchange every day, though that number has been contested at Coinmarketcap.com, where the business has appeared in different places on the site’s “reported” versus “adjusted” volume rankings of exchanges.

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