Why the BitMEX charges could be bad news for DeFi

In the aftermath of criminal charges against BitMEX, the crypto community is debating whether the decentralized finance sector is also set to face the wrath of regulators.

On Oct 1, the U.S. Commodity Futures Trading Commission announced charges against three BitMEX executives for violating the Bank Secrecy Act due to the exchange's allegedly weak anti-money laundering and know-your-customer policies.

DeFi protocols, including Decentralized Exchanges have made a virtue of having minimal AML and KYC procedurs.

While many DeFi protocols appear to believe that they can evade regulators simply by becoming fully decentralized, there are increasing doubts as to whether this is true - and in any case, DeFi protocols have come under fire recently for operating with a high degree of centralization, with 12 out of 15 top projects maintaining 'God Mode' admin keys.1/25. So a lot of Crypto Twitter doesn't understand why today's news isn't just bad for CeFi but is also bad for DeFi.

In a 25-post Twitter-thread, angel investor and blockchain consultant Adam Cochran examined the potential fall out from the BitMEX charges for DeFi protocols.

Cochran believes the crypto community should actually want regulations like the BSA to apply to DeFi, adding that "There is a difference between wanting sovereignty and privacy over your funds vs enabling criminal activity."

"CEXs can enable money laundering through their private databases but this is not true for DeFi where every tx is public and transparent. DeFi is much more trackable than private banks and CEXs.".

"DeFi projects need to continue focusing on building unstoppable financial infrastructure by free and open code."

BitMEX CEO Arthur Hayes certainly believes regulators will set their sights on other exchanges and DeFi protocols in the near future.

CryptoWhale told his 40,000 followers that he believes regulation is coming for 8,800 projects on the market "That are operating illegally and will be shut down" including DeFi tokens, exchanges and privacy tokens.