The trial that decides the regulation of cryptocurrencies
Ever since Arthur Hayes became a star in the Bitcoin universe, he has been named from pioneer to anarchist. On April 6, the former CEO of the BitMEX cryptocurrency exchange surrendered to the US authorities in Hawaii to face the latest "title" of the alleged criminal. Six months ago, prosecutors accused him and three of his associates of failing to carry out adequate controls for possible money laundering. Hayes pleaded not guilty and was released on $ 10 million bail pending trial in federal court in New York.
His legal problems come at a critical time for the asset in which he excelled. Regulators, as well as Wall Street, are entering the game to reshape the cryptocurrency "industry" as the value of Bitcoin grows. It recently traded close to $ 60,000, up from about $ 7,000 a year ago.
A 35-year-old American who has lived in Asia for a long time, Hayes had no problem playing the role of the "cryptocurrency rebel" who upsets the classic financial balances. BitMEX was launched in 2014, where traders could not invest in Bitcoin itself, but in contracts linked to its price movements. The name is an obvious reference to older markets, such as Nymex or Comex, where traders exchange futures contracts for oil or metals.
Contracts allow traders to take positions quickly, bet on falling and rising prices, and use leverage to maximize potential returns and risks. "I really enjoyed the fact that there weren't many such tools around Bitcoin at the time," the former Citigroup stock trader told Bloomberg in 2018. "It was an opportunity to do something on my own, to take a risk, I'm going to a structured, monolithic company. "
Banks and bribes
BitMEX has become a force in the growing cryptocurrency industry, handling about $ 65 billion a month in transactions by the summer of 2020. Hayes became rich, with some media reporting that he and the two co-founders of the company had become billionaires.
The derivatives exchange, which still operates with offices in Hong Kong and elsewhere, allows traders to leverage up to 100 times, a dangerous way to "play" with an unstable asset. It does not handle classic coins. Investors finance their accounts with Bitcoin. According to Hayes, prosecutors claim that BitMEX did not ask the necessary questions to people who wanted to trade there. The indictment alleges that its website once advertised that "it does not need a real name" or other forms of authentication to open account, except for one email address.
Hayes's motto was: "I'm a businessman, not a priest." At a conference in Taipei in 2019, he said that "Bitcoin represents an opportunity - instead of using courts, laws and violence to determine how money is transferred between individuals and entities, we use open source software, encryption and math." Discussing traditional financial institutions' criticism of Bitcoin as a tool for criminals and money laundering, Hayes said:"I do not think banks have the moral capital to make such a criticism." Hayes was based in the Seychelles and joked in the same forum that the main difference between the island state and US regulators was that Americans cost more if they had to be bribed.
Historical background
The case could set a precedent and doom as the cryptocurrency industry moves to the mainstream of financial activity. It often takes time for authorities to cover the technological leaps in the financial sector, but those in the US have hit other cryptocurrency companies with a series of civil cases and investigations over the past year.Instead of laying down new rules for dealing with Bitcoin and similar currencies, they rely on existing laws. "The Department of Justice is sending a clear message - if you try to circumvent US laws and regulations, we will prosecute you - and not just in a civil lawsuit, but in a criminal case," said Braden Perry, a former FBI official. US Commodity Exchange (CFTC).He says that as "bad" players enter the market, more conservative financial institutions may be interested in cryptocurrencies.
Hayes and his co-founders resigned from their management positions. The new boss of BitMEX, Alexander Hoptner, has begun to change the company's policies and tone. BitMEX reports that it has verified the identities of its active customers. A statement on its website said it was now "one of the few cryptocurrency exchanges outside the US to use the 'know your customer' slogan before a user could trade on the platform."
For many people who are excited about Bitcoin, its ability to put transactions beyond the control of governments has long been part of its appeal. However, the world of cryptocurrencies is changing.
