BitMEX Platform Plans For Growth With High Regulatory Hurdle

BitMEX announced change in tone to regulatory oversight
BitMEX's decision to not offer products in Seychelles, Hong Kong and Bermuda
BitMEX prepares for stringent regulatory environment
Crytpo and Bitcoin Market Cap Story of Day

Crytpo and Bitcoin Market Cap Story of Day

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CRYPTO STORY OF THE DAY

This Week, In Two Separate Blog Posts, BitMEX Both Announced A Change In Tone To Their Approach To Regulatory Oversight And Some Changes To Trading Rules - The Announcements Address What Are Arguably The Two Most Significant Existential Issues For The Platform.

The first of the two posts described BitMEX's decision to no longer offer their products in Seychelles, Hong Kong and Bermuda, ie the jurisdictions where they have offices. The note then goes on to describe that, 'the BitMEX platform is entering a new and exciting era' which will include greater transparency and audits of their insurance fund. Furthermore, the post included manifesto-esque language around embracing a new era of enhanced regulatory compliance. The following day's post described a change to trading rules which would restrict access to API users with high levels of posted but unexecuted orders. The move is intended to limit low-value 'bot' activity and other trading styles which put load on BitMEX engines but contribute little to the overall liquidity picture.

Takeaway: BitMEX CEO Arthur Hayes has frequently stated in recent interviews that the company has ambitions beyond current successes. Furthermore, there is increased competition from other service providers copying or putting slight tweaks on the BitMEX model. In the blog posts, the company has tried to address the two most apparent limitations to their growth. First, from a technical standpoint, the platform has well-known execution issues during periods of high stress. When volatility is high there are times where one cannot place orders (they are rejected) due to load on the system. With the change to the trading rules the company is trying to maintain a liquidity status quo but lower their burden of posting low-value orders. Second, and more complicated, is the regulatory status of the company. BitMEX, in only accepting crypto deposits, has existed almost entirely beyond the incumbent regulatory regime. This is now starting to draw interest from entities such as the CFTC. The company is likely right that they will have to expand interactions with regulators to continue to grow. It will be interesting to see whether they are able to accomplish that while maintaining the status quo on their highly-successful crypto-settled derivatives platform.

About the Author

FRNT Financial is an Institutional Brokerage which offers clients a variety of products along with research & analytics in the crypto-space.