BitMEX, one of the oldest and most controversial cryptocurrency derivative exchanges, announced mandatory identity verification for all users.
Registering to trade on BitMEX takes “less than 30 seconds,” according to its homepage, where new users outside of restricted jurisdictions are required to enter only an email address, password and pick a country of residence.
That will end on Aug. 28 when verification will be mandatory for all users, a process that will include proofs of location, funds, trading experience, and more, according to Ben Radclyffe, commercial director for the BitMEX parent company, 100x.
The policy change comes with a six-month “grace period” ending in February 2021 to accommodate unverified users completing the process.
Easy registration, high leverage and bitcoin-only account balances helped BitMEX bootstrap liquidity from all directions and give rise to its reputation as the destination trading platform for unorthodox cryptocurrency traders.
The exchange’s primary motivations for this change are to remove barriers to entry for some of its target users, improve the security of the platform, and “get ahead of evolving regulation” in the cryptocurrency industry, Radclyffe said.
The change also will help BitMEX to better understand its user base, he added.
BitMEX’s corporate strategy has included plans for mandatory identity verification “for a while,” but running the verification system at scale for all users took time, Radclyffe said on a call with CoinDesk, noting a “material technological lift.”
The Eden Island, Mahé-based exchange has prohibited U.S.-based traders from using its platform since 2015, and recently blocked would-be traders in Hong Kong, Bermuda and Seychelles as well.
Notably, a “good number” of BitMEX users have already verified their identities voluntarily, according to Radclyffe. Individual verification should take no more than five minutes to complete, he said. Corporate verification is a more involved process, however.
Over the medium and long terms, mandatory identity verification should increase the volume and liquidity on BitMEX, Radclyffe told CoinDesk, even if, in the short term, some traders decide against completing the process.
Radclyffe also described mandatory identity verification as a “building block” that sets the stage for future BitMEX products and a general “ability to do more.” For example, he told CoinDesk that BitMEX plans to host a “very significant” trading tournament later this year, which will require user identity verification.
BitMEX, known for popularizing the perpetual swap futures contract among cryptocurrency traders, is currently the second largest cryptocurrency derivatives exchange by open interest, with just less than $1 billion in open bitcoin futures contracts, according to Skew.