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BitMEX Founders Charged with Failing to Prevent Money Laundering

The Bitcoin Mercantile Exchange, or BitMEX has just been charged by US regulators. The charge they’ve received is failing to prevent money laundering on their platform. BitMEX, which is incorporated in the Seychelles, was not operating in accordance with US rules and regulations. They failed to implement meaningful KYC procedures, as well as anti money laundering detection tools. These failures ultimately mean that the founders can face up to 5 years of prison time, as well as a financial penalty. The founders of BitMEX have issued a joint statement rejecting the charges. They intend on fighting the allegations in court.

money being thrown into a laundry machine indicating money laundering

The State of Money Laundering in the World

One of the most common critiques of the world of cryptocurrency is its use for money laundering. This critique is rife with irony when considering the following fact. Most money laundering is done using FIAT based money systems. An annual report released by the United Nations predicts that money laundering through the traditional financial system is between $.8 and $2 trillion dollars. From this perspective, cryptocurrencies pale in comparison to the amount of money laundered using cryptocurrency systems such as exchanges.

Bringing this fact to light in this article is not an attempt to exonerate perpetrators of money laundering. Inside or outside the world of cryptocurrencies. The illegal usage, movement, and garnering of capital is a crime, FIAT or not. It is important to hold anyone conducting money laundering accountable for their actions. Money is at the root of crime in general, and we need to put financial crime in perspective. It would be a misallocation of resources if financial crime analysts only pursued financial crime that takes place in crypto.

Cryptocurrency is not Ideal for Money Laundering

Contrary to what mainstream media may want the public to believe, cryptocurrency is not ideal for money laundering. Cryptocurrencies are more traceable, and transparent than the legacy banking system. The systems that run the cryptocurrency world are by and large digital in nature. Furthermore, they are a lot smaller in magnitude than the systems that make up the traditional banking systems. These two factors end up making cryptocurrency ideal for tracing and detecting fraudulent transactions. Some of the world largest cryptocurrency exchanges are following the rules and regulations set by governments in exemplary fashion. Exchanges like Binance, Kraken, and Crypto.com have all gone out of their way to ensure they are following AML and KYC policies.

That being said, there are a number of cryptocurrencies that have implemented technology that completely restricts both transparency and traceability. These are cryptocurrencies such as Monero and zCash. Chainalysis, a blockchain analytics company just received a contract to trace transactions on the Monero blockchain. The amount of money flowing through these systems still pales in comparison to the amount of money laundered through FIAT money systems.

Keep Everyone Accountable

If the founders of BitMEX are found to have engaged in illegal activity, then accountability is a must. Similarly, JP Morgan just received one of the largest ever fines given to a US Bank (920 Million). The fine was for market manipulation. It is great to see regulators not going after just cryptocurrency companies, but also mainstream banks. This is the right course of action as it indicates a lack of bias for the type of financial crime. It would appear that the narrative that cryptocurrencies are great for money laundering is one that is driven by detractors. That is, people, organizations, or media companies that have interests counter to the technological advancements brought by cryptocurrencies.