The case against BitMEX is a compass pointing towards the future of crypto regulation

On Oct. 1, the United States Department of Justice filed criminal charges against four executives of the BitMEX trading platform - including its founder, Arthur Hayes - for violating the Bank Secrecy Act.

The Commodity Futures Trading Commission also filed a civil enforcement action against BitMEX and three of its executives for violating Anti-Money Laundering regulations.

The regulatory body claimed that BitMEX and its top brass have been engaging in shady activities for years, such as using weak Anti-Money Laundering and Know Your Customer policies that bad actors can exploit using various methods such as VPNs to mask their virtual identities, among others.

BitMEX makes use of a complex international corporate structure that includes a number of separate individual entities, and as a result, it's not entirely clear where exactly the firm is based.

It's worth noting that BitMEX openly promotes on its website that it's registered in the Seychelles and has offices in premier destinations such as Hong Kong and New York.

BitMEX customers appear to have no limits on their Bitcoin withdrawals but have to go through an ID check, although the checks will only become mandatory for traders in February 2021.

"BitMEX has been under investigation by the CFTC since early 2019 for allowing Americans to trade on the platform, and they were given time to improve their Customer Identification Program to effectively exclude US persons. It's not that law enforcement hasn't been following and warning BitMEX, but that BitMEX's ongoing negligence and lack of compliance led to the hammer finally coming down on them."BitMEX executives under fire.

"If BitMEX is found to have been operating unlawfully, in addition to the fines and penalties, the CTFC will also seek to 'disgorge' or recoup all of the profits generated by the exchange. This is consistent with the general idea that 'wrongdoers' should not profit from their unlawful activity."

The allegations against BitMEX are serious and make a compelling case for decentralization.

Any regulatory action against BitMEX will likely cause existing protocols to decentralize more quickly - and future protocols to decentralize immediately.