Everyone Neglects Non-Travel Rule Data. Not BitMEX

In an official blog post, BitMEX explained that it was looking to improve compliance with the Travel Rule from the Financial Action Task Force (FATF).

The Travel Rule was instituted in 2019 to guide digital asset custodians on how to collect transactional data. It primarily focuses on collecting information concerning parties to transactions, especially when they cross a certain threshold. In the blog post, however, BitMEX explained that it was focusing on storing additional data that the Travel Rule might not concern itself with.

Per reports, Malcolm Wright, the compliance chief at 100x Group (BitMEX’s operator), explained that the new rules were compiled following conversations with seasoned industry experts. They encompass standards for data transmission, storage, and protocols for information handling.

The Seychelles-based derivatives exchange also focused on data security, providing guidelines for encryption and access management. Wright expressed his belief that the new rules will help exchanges to separate Travel Rule data from other operational customer information. Eventually, exchanges could use the standards as a benchmark for evaluating partners.

BitMEX’s renewed focus on customer security and data protection follows a lawsuit from the Commodity Futures Trading Commission (CFTC) last October. At the time, the regulator had accused the company of operating an unregistered securities platform, allowing customers in the United States to access its services despite reporting that it had left the country. The agency also charged BitMEX with anti-money laundering (AML) policy violations

The CFTC’s lawsuit dragged BitMEX, its holding company, and several top executives, including Arthur Hayes, Gregory Dwyer, Sam Reed, and Ben Delo. All executives have since stepped down, and BitMEX has made significant overhauls to its operations as it looks to stay on regulators’ good side from now on.

A separate suit from the Justice Department alleged that BitMEX had relied on money laundering as part of its business model. The case goes much further than the CFTC’s, and it could mean a jail term for the individuals involved.

Since then, BitMEX has been on a remediation spree. Apart from the leadership change, the exchange has taken significant steps to improve its internal controls and security infrastructure.

A month after the lawsuits landed, BitMEX announced a partnership with compliance and software firm Eventus Systems to improve its AML and trade surveillance capabilities. The partnership saw the exchange directly integrate Eventus’ Validus technology into its existing processes to provide a “safe and secure trading environment” for all users.

BitMEX is also working with top crypto research firm Chainalysis. The exchange has advertised the collaboration, revealing that Chainalysis would help with investigating and monitoring illicit transactions on its platform.

Significant progress has been made with BitMEX’ security infrastructure. Last month, the derivatives exchange confirmed that it had completed its user verification process. This means that all of the exchange’s users are verified, according to the announcement. BitMEX added that it has also closed down all positions held by unverified accounts.

So far, BitMEX’s switch in operation has been laudable. However, it is unclear whether they will do much to change regulators’ views on their past. The company still has cases with both the Justice Department and the CFTC, and it’ll need to win those if it hopes to keep its operations going. Operations overhauls might not do so much to change its accusers’ minds.

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