The Worst-Kept Bitcoin Secret: US Traders Continue to Avoid Foreign Exchange Restrictions

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Foreign cryptocurrency exchanges attempt to limit U.S. users in order to avoid U.S. regulators. According to a new report, it is still not working.

According to a new report, US traders continue to easily circumvent foreign cryptocurrency exchange restrictions in order to profit from risky Bitcoin bets.

Crypto derivatives traders from the U.S. can get around bans aimed at stopping them from using exchanges like Binance and FTX simply by using a virtual private network (VPN), which masks a user’s location by projecting it to another country, the Wall Street Journal reported today.

Many foreign cryptocurrency exchanges prohibit U.S.-based traders in order to avoid the hassle of dealing with regulatory agencies in the United States. Binance, the world’s largest cryptocurrency exchange, announced today that it was ceasing derivatives trading in Europe due to a recent regulatory crackdown on the exchange.

The WSJ cited a Friday report by data firm Inca Digital, which looked at tweets from U.S. traders who boasted about the amount of money they’d made trading derivatives.

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“Trading venues often rely on IP address attribution-based filters, which are easy to circumvent by using a VPN with an exit node in another jurisdiction,” the report said.

The report found that out of 2,000 Twitter accounts belonging to derivatives traders analyzed, 372 came from the States. And this is only the tip of the iceberg, because many derivatives traders don’t boast about their trades on Twitter.

Inca’s research connected US traders to exchanges such as Binance, Bitfinex, BitMEX, Bybit, FTX, Huobi, and OKEx.

However, this is not a new development, as Decrypt reported on the “worst kept secret” in crypto years ago—derivatives exchange BitMEX was under investigation in 2019 because U.S.-based traders could use its platform. (At the time, Decrypt was able to open a BitMEX account from New York, where such trading is prohibited, in less than a minute.)

Trading derivatives is where serious money can be made.

 

Unlike spot trading, which simply involves purchasing cryptocurrency such as Bitcoin or Ethereum on the spot, traders buy and sell contracts that bet on the price of cryptocurrency fluctuating up and down. It is a multi-trillion-dollar industry that moves markets, particularly when things are going sideways. Liquidations of $1 billion in futures contracts, for example, were a major cause of a massive drop in the price of Bitcoin in March.

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However, if Inca’s research is to be believed, astute traders who want to participate in risky markets will continue to find a way.

 

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