Bittrex Went to the Wall. Was That Foreseeable?
On May 9, the crypto industry was struck by an overwhelming event — American-based Bittrex exchange filed for Chapter 11 bankruptcy in a federal court in Delaware. Despite the fact it has shaken up a great mass of digital assets’ enthusiasts, the dawn of Bittrex was clearly a foregone conclusion. To prove what I stated before, I present a chain of events which critically jeopardised the exchange’s existence. Spoiler: US crypto regulations are implicated.
Important note: filing for bankruptcy affected only Bittrex U.S. The operations of Bittrex Global are still in work.
The First Collapse: Enforcement Actions Against Bittrex by US Treasury Department
The downfall of Bittrex has taken up with the US Treasury Department imposing the fine of $53 million overall on the exchange in October 2022. This was assumed to be a countermeasure for Bittrex’s non-compliance with AML (anti-money laundering) policy. According to US authorities, Bittrex allegedly provided access to the market to the malicious actors. For instance, residents of sanctioned territorial units were able to withdraw $263.4 million using Bittrex between 2014 and 2017. Having stated that, a logical question arises: were such insinuations intentional by the exchange, considering their access to a full range of users’ IP addresses?
In spite of the genuine state-of-things, the situation indicates the necessity to implement upscale security terms and technologies, which are being prioritised by major global and European crypto exchanges, such as WhiteBIT.
The Second Collapse: SEC accuses Bittrex of Investor Protection Violation
In March 2023, US Securities and Exchange Commision incriminated Bittrex of operating as an exchange, broker-dealer and clearing house without required registration in the regulative body. That forced the exchange to curtail all the operations in the USA, despite the leadership’s long-term ambition to fight SEC and win a case.
Notably, Bittrex’s legal adviser David Maria claimed that the exchange used to be in progress of negotiations on regulations with SEC, however faced the obstacles following the regulating rules due to the fact that there wasn’t any of them accordingly.
Closing remarks
In a nutshell, the story behind Bittrex’s bankruptcy is a paradox, being full of controversies and vagueness as much as of valid facts and details.
From a certain perspective, regulatory sanctions targeting the exchange are completely sound, considering its involvement in scams, felonies and suspected digital-money laundering, all of which was mentioned above.
However, there is another way of looking at these circumstances. David Maria, a legal adviser of Bittrex who was mentioned earlier, distinctly pointed out that the regulating obscurity and lack of well-defined registering terms was the main reason for Bittrex to quit the US crypto market as it leaded to uncertainty about what is allowed to be offered to the customers of the exchange and finally forcing it to file for going to the wall.
All things considered leaves us with a plausible outlook — the fundamental concern about US coordinated elimination of the crypto industry behind the mask of “regulation adjustments” may be not the foremost, but at least a pivotal reason why Bittrex filed for Chapter 11 bankruptcy.
And what is your opinion on that topic? Can the illicit actions of Bittrex be an excuse for American state bodies’ disruptive initiatives?
