- BitMEX has new leadership following the charges against the three founders earlier this month
- The new company heads have to decide whether BitMEX goes legit or continues on its current path
- Either decision comes with problems and will see the exchange seek a new USP
October has been a decidedly bad month for BitMEX. On the 2nd the Commodity Futures Trading Commission (CFTC) announced the findings of their 15-month investigation into the exchange, which resulted in the three co-founders being charged with operating an unlicensed exchange. Just days later the three founders and another key executive stepped aside, leaving a power vacuum at the company. The new executives have difficult decisions ahead of them with regard to the future of the exchange as they attempt to prevent it from being a crypto trading relic.
Fork in the Road
BitMEX is now at a fork in the road with two very distinct avenues open to it. On the one hand it could end its regulation-flouting ways and make a new start, complying with the raft of new regulations being imposed on almost all other cryptocurrency exchanges. This would allow it to continue to offer its services in the knowledge that it would not be at risk of further investigation, although its wings would likely be clipped as a result – gone would be the days of 100x leverage trading.
Alternatively, BitMEX’s new CEOs could decide to continue with the current business model, hiding behind shell companies and offering three-figure leverage trading with minimal KYC on the platform. This represents the best way for the exchange to try and retain what is left of its customer base, all of whom will know, as the CEOs will, that the CFTC and other agencies will be looking over their shoulder 24/7, seeking out ways to shut it down.
BitMEX’s USP Has Vanished
Whichever route BitMEX takes, the likelihood is that its best days are behind it. Its USP is high leverage trading with no regulatory oversight – millions left the platform in August when it was announced that KYC would be belatedly employed on the exchange.
With this USP gone, it will have to appeal to a new clientele – a clientele who will by now be using alternatives like FTX and Binance Futures. In many ways BitMEX is like LocalBitcoins, a relic of Bitcoin’s past who had no choice but to comply with regulations if it wanted to survive. LocalBitcoins still lives on in countries where Bitcoin cannot easily be purchased and sold, but in most countries it is remembered as the place where Bitcoin used to be traded before regulators ruined its USP.
The chances are that whichever route BitMEX takes will have a similar end result, leaving it with a dwindling customer base and remembered as nothing more than an example of cryptocurrency’s Wild West days.