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Fintech CEO: BitMEX Exec’s Surrender Won’t Be Last, as Chickens Come Home to Roost

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Recent reports note BitMEX co-founder Benjamin Delo has surrendered to authorities after he was charged with helping the company evade AML regulations.

Delo pleaded not guilty and was released on bail. The exchange allowed users to leverage up to 10000% their BTC position, making it popular among speculators.

“What we’re seeing here with BitMEX… it won’t be the last exchange to get hit with AML & KYC violations. Part of that is because some operators intentionally flout the laws. Another part can be traced to technological implementation,” noted Richard Gardner, CEO of Modulus, a US-based developer of ultra-high-performance trading and surveillance technology that powers global equities, derivatives, and digital asset exchanges.

“Many of these exchanges were created using technologies that are antiquated or not well designed for the rigors of regulation. Instead of investing in the proper tools and legal advice to stay well ahead of the law, many exchanges decided to shoestring it, buy inferior technology, and move ahead without fully understanding the risk. Now, those chickens are coming home to roost.”

“During the bull run on cryptocurrency several years back, new operators were itching to get into the game fast. They didn’t have the time to develop their own technology, and they didn’t have the money to pay for quality exchange software that had been tried and true for decades. So, they bought into new white-label software providers that didn’t have any experience building exchanges. Without experience in the space, they never really considered what would happen once regulators caught up with the innovation, and their clients didn’t know enough to ask,” noted Gardner.

“Cryptocurrency exchanges are so complex because they’re regulated so differently across the globe. Planning to be compliant in one country isn’t enough to make you compliant in the next. We’ve always designed software to be compliant in the most restrictive jurisdictions, as well as plan for where they will be in five years’ time. That’s not always possible, as regulators can be reactionary in implementation, but it is the goal. The lowest hanging compliance fruit is being on top of AML & KYL regulations. Exchanges can use geofencing to help ensure compliance. When you’ve decided that you’re going to invest in compliance, there are so many tools available to make sure it is done correctly, so that you don’t end up like the BitMEX co-founders,” explained Gardner.

Modulus is known throughout the financial technology segment as a leader in the development of ultra-high frequency trading systems and blockchain technologies. Several years back, the company launched the Modulus Market Surveillance & Risk Management System, which provides clients with actionable alerts identifying market manipulation, abusive trading behavior, and money laundering to ensure adherence to regulatory guidelines and rules that govern trading conduct.

“We, at Modulus, have always been intent on limiting client risk, and that starts with ensuring their technology stack is compliant with the latest rules and regulations. So many crypto-preneurs see compliance as a cost, but, in truth, it can be the difference between operating profitably and not operating at all,” noted Gardner.

Over the past twenty years, the company has built technology for the world’s most notable exchanges, with a client list which includes NASDAQ, Goldman Sachs, Merrill Lynch, JP Morgan Chase, Bank of America, Barclays, Siemens, Shell, Yahoo!, Microsoft, Cornell University, and the University of Chicago.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Here is Why Cryptocurrency, U.S-Dollar Quoted Commodities Drop this Week

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Dollar Cryptocurrency - Investors King

The United States is the world’s largest economy and cryptocurrency’s biggest investor, it means large number of capital inflow into the crypto space are from the United States and with the U.S economy battered and unstable due to COVID-19, foreign policy, etc US investors, mainly institutional investors, have been increasing their investments in crypto space, the new safe haven, in the last one year.

However, on Friday, the U.S commerce department released retail sales report, which measures US consumer spending that contributed over 70% of US GDP estimated at about $13.4 trillion. Retail sales that has been on the  decline for months and was predicted to come out at – 0.8%, unexpectedly came out at 0.7% in the month of August.

The unexpected improvement in consumer spending, in fact against the Consumer Confidence report that came out previously, bolstered U.S dollar attractiveness to 94 on dollar index as investors jumped on it and other dollar assets.

Why did investors jump on Dollar and how does it affect crypto and U.S dollar-quoted commodities?

The US dollar rose to a three-week high because capital inflow into American assets jumped as investors started predicting that the Federal Reserve (US central bank) could announce tapering (cutting down on bond buying -quantitative easing) at the Federal Open Market Committee (FOMC) meeting scheduled to be hold next week.

Quantitative easing is when government is buying debt (bonds) to support the economy. However, when government is cutting bonds purchase, it means the economy has started doing well enough to sustain itself without support.

This is why capital flow out of crypto space rose as institutional investors that are sustaining the crypto are now dumping their money on dollar assets – the very reason dollar value rose since Friday.

Market is about demand and supply, no demand in crypto space means falling/bearish market and demand in dollar means stronger US dollar – I actually bought dollar -sold GBPUSD- on Monday.

Here is why dollar quoted commodities like crude oil dropped. It is simple, because dollar products is now expensive for holders of other currencies. Therefore, demand for crude oil dropped against constant supply.

If FOMC announces tapering earlier than expected next week, crypto could fall even more!

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Fintech CEO: India’s Former Deputy Governor of RBI Right on Crypto

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Recently, R. Gandhi, the former Deputy Governor at the Reserve Bank of India, went on the record, saying that cryptocurrencies should be treated as an asset or commodity. Such treatment would ensure that they are governed by existing laws and regulations for exchanges. Once this happens, Gandhi noted that “…automatically, people can start buying, selling and holding.” He also noted that regulators would be able to retrieve information on holdings for purposes of taxation.

“This is important for a few reasons. First, India is preparing to test out its own central bank digital currency, so it makes sense that they would take a look at how they regulate all digital assets before the launch. Second, India is a major power, which, until recently, has not been the friendliest towards cryptocurrencies, so this new approach should be a welcome change of direction for those involved in the industry. Finally, it’s also worth discussing when you consider how India has typically interacted with assets and wealth,” said Richard Gardner, CEO of Modulus, a US-based developer of ultra-high-performance trading and surveillance technology that powers global equities, derivatives, and digital asset exchanges.

“India has long been a country which has been loyal to both cash and gold. Those kinds of cultural attitudes, many hypothesize, may be the largest hurdles for CBDCs. Can you educate enough of the populace to move them from cash to a digital asset of any kind? Now, you have a big name with RBI ties saying that the country needs to re-evaluate how it deals with cryptocurrencies. That’s telling,” noted Gardner.

“I’ve long believed that the education component will be as important as the technological component. You can build the most secure, most convenient digital currency on the planet. But, if it isn’t widely used, then it really doesn’t matter. Particularly in countries with a loyalty to a cash economy, the educational aspect of a central bank digital currency could present problems,” Gardner said.

Modulus is known throughout the financial technology segment as a leader in the development of ultra-high frequency trading systems and blockchain technologies. Over the past twenty years, the company has built technology for the world’s most notable exchanges, with a client list which includes NASA, NASDAQ, Goldman Sachs, Merrill Lynch, JP Morgan Chase, Bank of America, Barclays, Siemens, Shell, Yahoo!, Microsoft, Cornell University, and the University of Chicago.

“If I’m looking to support a CBDC from the RBI, I’d begin the educational component now. According to surveys, cryptocurrency usage in India is up significantly over the past couple years. However, now is the time to work with stakeholders and give the citizenry peace of mind. They need to explain why a CBDC would benefit them, and, most importantly, let folks ask questions so they can feel comfortable with the transition. All that takes time,” said Gardner.

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Coinbase Abandons Plan to Launch Lend Program After SEC Threatens Lawsuit

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The Nasdaq-listed cryptocurrency exchange Coinbase has dropped its plan to launch a lending program after the U.S. Securities and Exchange Commission (SEC) threatened to sue the company.

Coinbase announced that it has decided not to launch the Lend program. The exchange wrote:

Our goal is to create great products for our customers and to advance our mission to increase economic freedom in the world. As we continue our work to seek regulatory clarity for the crypto industry as a whole, we’ve made the difficult decision not to launch the USDC APY program.

“We have also discontinued the waitlist for this program as we turn our work to what comes next. We had hundreds of thousands of customers from across the country sign up and we want to thank you all for your interest. We will not stop looking for ways to bring innovatively, trusted programs and products to our customers,” Coinbase added.

Coinbase unveiled the Lend program in June where users could “earn interest on USD coin (USDC) with rates more than 50x the national average of a traditional savings account,” the company explained at the time. The program advertised that users could earn 4% APY and the “principal is guaranteed.”

However, Coinbase revealed in early September that the SEC sent the company a Wells Notice regarding its Lend program. “The SEC has told us it wants to sue us over Lend. We don’t know why,” the exchange said. “The SEC told us they consider Lend to involve a security, but wouldn’t say why or how they’d reached that conclusion.”

Meanwhile, Coinbase is growing its business in some other ways. Last week, the company filed an application with the National Futures Association (NFA) to offer futures and derivatives trading on its platform. Coinbase is also raising $2 billion by selling bonds. Furthermore, the exchange announced Monday that Coinbase Prime, a comprehensive platform for institutional investors, is launching with updated capabilities.

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