Bans on Americans using crypto exchanges like Binance and FTX to trade derivatives are full of holes, report says

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Crypto coins circle
crypto coins circle

  • American traders are bypassing bans on accessing offshore crypto exchanges, according to a WSJ report.
  • One of the most-used exchanges was FTX, run by 29-year-old crypto billionaire Sam Bankman-Fried.
  • Some users leverage virtual private networks to access non-US exchanges by appearing to come from elsewhere.
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American traders seeking to deal in crypto derivatives are bypassing bans on accessing offshore exchanges, according to a new Wall Street Journal report.

The methods US traders use to access offshore crypto derivatives exchanges can be remarkably simple. Some users leverage virtual private networks to access non-US exchanges by appearing to come from elsewhere. In some cases, US traders can simply lie about their location without any further verification required.

While derivatives exchanges are nominally under the supervision of the Commodity Futures Trading Commission, many exchanges operate outside the US and do not officially serve American clients to avoid the CFTC’s strict rules. But a recent report by market surveillance from Inca Digital uncovered hundreds of US traders able to easily access these overseas exchanges.

“U.S. customers will likely have little or no protection if they trade with unregistered firms that operate outside the U.S.,” the CFTC told the Journal.

One of the most-used exchanges identified by Inca was FTX, run by 29-year-old crypto billionaire Sam Bankman-Fried. In the wake of the Journal’s reporting, FTX committed to closer verification of users’ locations and inked a deal with Inca to prevent users from accessing the exchange improperly.

Bankman-Fried told the Journal that the American users Inca identified or a tiny fraction of FTX’s total trading volume. FTX runs a specialized exchange for Americans meant to comply with regulations, called FTX US.

The Inca report crawled through Twitter to identify users’ locations based on screenshots of their trades, usually posted to brag about a highly successful move. Inca was able to identify American users on several other top exchanges including Binance and Bitfinex.

https://markets.businessinsider.com/news/currencies/crypto-derivatives-exchanges-bans-ftx-binance-cftc-regulation-2021-07

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