The UK’s financial regulator, the Financial Conduct Authority (FCA), has issued a formal warning to British crypto traders about the safety of the BitMEX platform. The FCA has warned that because BitMEX is not registered to provide financial services in the UK it could potentially operate in a fraudulent manner and British traders have no recourse for compensation should they lose out.
BitMEX in the Same Category as Loan Sharks
The FCA posted the warning to its website on Tuesday, stating that BitMEX is “targeting people in the UK” and that its lack of a license put in the same category as loan sharks and anonymous Twitter ‘traders’ who trade on users’ behalf. Crucially, the FCA is not warning against trading on BitMEX, merely that the lack of authorization means that it cannot guarantee that the operators are not running a scam.
A similar situation exists in the US, where citizens are banned from using BitMEX due to its lack of regulatory approval, but that has rarely stopped determined traders – in July last year it was the target of a U.S. Commodity Futures Trading Commission (CFTC) probe due to its failure to block US citizens from using the service.
BitMEX is registered in the Seychelles and prefers to exist in the murky waters of non-regulation, something that CEO Arthur Hayes couldn’t adequately explain when questioned on the matter by Nouriel Roubini during their clash last July.
BitMEX has come in for criticism in the past, with users complaining about the instability of the platform after outages at critical times caused trades not execute as planned, leading to liquidations.
Authorities in the UK cannot block users from accessing unregulated sites such as BitMEX, just as they can’t stop people from taking loans from dodgy peer-to-peer lenders. BitMEX is not the only unregulated crypto exchange out there by a long shot, but it is one of the most popular sites for leverage trading, so it is fair that the authorities should warn users of the risks involved in using them.
Like anything in crypto, ‘buyer beware’, or in this case ‘user beware’, should be your watchwords.