Is BitMEX Legal?

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Unfortunately, there is no short answer. Although strictly illegal in some countries, and legal in a few others, BitMEX is in a gray legal area in most. 

The topic is very nuanced, but on a top-level, whether BitMEX is legal for you, depends on your nationality and the jurisdiction that you reside in. 

About the company

BitMEX is registered as “HDR Global Trading Limited” in Seychelles and has offices in San Francisco, Hong Kong, and Singapore.

However, even though the firm offers sophisticated Bitcoin derivatives, it does not have a broker license. 

This makes it illegal for BitMEX to operate in countries with strict regulatory market oversight, like the US or China.

Banned countries

Since BitMEX does not have broker licensing for any country, it is forced to ban citizens from countries where it can’t comply with regulations.

The list of restricted jurisdictions includes United States, Québec Province, Hong Kong, China, and Cuba.

That said, the derivatives exchange only enforces this ban by reading the user’s IP address. Unlike other exchanges, BitMEX does not require users to complete identity verification.

Hence, it would be reasonably simple for citizens from any restricted country to bypass the ban, by using a VPN service provider.

Controversies

Since its launch, BitMEX has been stricken by several controversies. 

Namely, its in-house trading team that trades against BitMEX customers, strange price action that seems to target liquidation levels and stop-losses of traders, and questionable usage of the exchange’s colossal insurance fund.

Such practices would be unlawful, in many countries, if conducted in traditional financial markets. However, due to Bitcoin’s unregulated nature, BitMEX has been turned the blind eye for now.

BitMEX Lawsuits

The fact that BitMEX legally operates in an offshore jurisdiction, makes it very hard to bring the company to court. 

However, this is not to say that it hasn’t happened yet. In a recent lawsuit, BitMEX has been accused of money laundering and market manipulation. 

Further, BitMEX has also been sued by an early seed investor in the company, who claims that BitMEX owes him $50m worth of equity.

Conclusion

If you don’t reside in one of BitMEX’s restricted jurisdictions, then the exchange is legal to use for you. 

However, it is uncertain if the exchange’s platform is legal as a business, to begin with, due to the lack of KYC/AML procedure in the sign-up process, as well as the lack of a broker license.

This is a bigger concern for the exchange operators though, and not one for its users.

pascal thellmann

Pascal Thellmann is an algorithmic trader mostly focused on crypto breakout strategies. He started CoinDiligent to share his learnings and give paid access to some of his automated trading strategies. You can get in touch with Pascal on LinkedIn or Twitter.

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