What the CFTC investigating BitMEX could mean for bitcoin and crypto market

The Commodities and Futures Trading Commission has started an investigation into BitMEX, the largest margin trading platform in the crypto market, according to a Bloomberg report.

BitMEX, along with other major margin trading platforms, have not allowed U.S. customers to trade derivatives on the platform to avoid scrutiny from U.S. regulators.

The unexpected move of the CFTC comes after the remarks of U.S. Treasury Secretary Steve Mnuchin and his warning against increased efforts to tighten policies around the crypto sector.

Last month, BitMEX achieved $16 billion in daily volume across its derivatives products including the widely utilized bitcoin contract when the price of bitcoin peaked at $14,000.

Primarily due to the popularity of its bitcoin contracts, BitMEX has secured its dominance over the crypto market throughout the past several years.

The CFTC is said to be exploring whether BitMEX has facilitated trades for U.S. customers over the years and whether U.S. customers have been able to bypass restrictions set by the exchange by using virtual private networks or VPN. A BitMEX spokeswoman told Bloomberg that the company cannot comment on investigations by government agencies.

Why is CFTC going after the biggest bitcoin margin trading platform?

Secretary Mnuchin added that crypto money transmitters will be subject to the same standards and regulations as every other U.S. bank, indicating that FinCEN is likely to enforce existing regulations on crypto-related entities at full capacity.

The CFTC's investigation into BitMEX, the decision of Binance to replace crypto-to-crypto trading in the U.S. with a fully regulated exchange called Binance US, and the geopolitical ban on certain cryptocurrencies by Poloniex and Bittrex indicate that companies are increasingly expecting stricter oversight in the near term.

In the short term, the BitMEX investigation could pose a negative effect on the crypto market especially due to the timing, which comes immediately after the release of the remarks of Treasury Secretary Mnuchin.