Recent BitMEX Crackdown Will Boost DeFi: Industry Insiders

The recent BitMEX crackdown will only boost DeFi as it showed once again that decentralization is the way to move forwards for those offering crypto-related services according to a few industry insiders. In our latest blockchain news, we discuss some more.

According to the Defi-focused newsletter The Defiant, the charges against BitMEX by the Commodity Futures Trading Commission will only boost the Defi space and will push more crypto projects into decentralization. The Newsletter quoted Jake Chervinsky who is a general counsel at Compound Finance saying that the latest complaints against BitMEX will not apply to all DeFi protocols as “most governance tokens don’t operate a protocol in the way that owners of a centralized exchange company operate a trading platform.” Chervinsky further explained that DeFi protocols don’t hold their users’ funds:

 “DeFi protocols are autonomous, self-executing code.”

According to our data, last night more than 23,200 BTC were withdrawn from #BitMEX addresses in a single hour (~13% of all BTC in their vaults).

That is the largest hourly $BTC outflow from BitMEX we've observed so far.#Bitcoin

Hourly chart: https://t.co/73rfTruwOH https://t.co/T5jbJPZx5O pic.twitter.com/todtRjRK6q

— glassnode (@glassnode) October 2, 2020

Also commenting on the developments, Anil Lulla, the co-founder of the Delphi Digital crypto research firm, was quoted saying that he sees the recent BitMEX crackdown as good for Defi in the long-run. He also added that “it will still be interesting to see whether or not Decentralized finance products can really dodge the KYC/AML in the future” while noting that the regulators could adapt with different penalties.” Lulla said that the incident is “bearish on CEXs with KYC and Bullish for the Defi in the long-term”

Ryan Watkins of Messari, noted on twitter that we have seen a “major exchange hack and a major regulatory crackdown” in the past week:

 “If you don’t understand the value of DeFi now you’re just not paying attention.”

I suspect those of us laughing at BitMEX are not doing so because “regulators good”, it’s because Centralized Exchanges are bad. Especially the cabal of CEXs creating a new “banking elite” in crypto. How about no banking elite… or is that ethos dead?

— Andrew ⟠ (@cyber_hokie) October 1, 2020

Despite the Decentralized finance apps aiming to avoid the regulators, some believe that the governance agencies will come after those that provide these services which are often referred to by regulators as Virtual Asset Service Providers. CipherTrace noted in a recent report:

 “As DeFi continues to grow, it’s plausible that these decentralized exchanges can fall under the scope of global regulators. FATF [Financial Action Task Force] already considers decentralized exchanges “VASPs.”

Regardless of the crackdown and why it could push for more decentralization in the industry, BitMEX users have already reacted by pulling their coins from the exchange with more than 23,000 Bitcoin getting withdrawn from the platform in one hour after the announcements were made.