Bybit CEO Ben Zhou Talks Crypto Regulation In The United States, Bybit's Upcoming Suite Of Products

As regulators in the United States zero in on the cryptocurrency space, major players are contemplating how to navigate the ever-changing landscape. Singapore-based derivatives exchange Bybit has banned US citizens to avoid compliance complications, meanwhile their competitor BitMEX is facing charges from both the Commodities and Futures Trading Commission and The Department of Justice. 

"I believe the regulation will get much stronger starting in the US and it will be like a wave," Bybit CEO Ben Zhou told BitpushNews. "You can already see the UK has said they are going to ban the crypto trading and you might start to see this sort of snowball effect with Australia and other countries starting to follow."

Bybit touts over one million registered users and $1,426,566,582 worth of volume through offering BTC/USD, ETH/USD, XRP/USD, EOS/USD and BTC/USDT perpetual contracts. The company's services are available globally, but leadership has banned clients from the United States because of regulators' harsh attitudes towards crypto. 

"The US has always been very protective when it comes to their clients and national concerns. If you don't have the license there and they start to see a lot of US clients trading they might start looking into it," Zhou said. "The US has traditionally been very strict on these types of things, unless you're regulated in the US don't mess with these projects."

It became clear that US regulators were amping up their surveillance of the crypto space earlier in October when both the Commodities and Futures Trading Commission and The Department of Justice filed charges against leading cryptocurrency exchange and Bybit competitor, BitMEX. The regulatory bodies accused the exchange of offering US customers illicit crypto derivative trading services and violating CFTC anti-money laundering practices. One week after the charges were filed, The Department of Justice published an 85 page report outlining a cryptocurrency enforcement framework for the nation.

While the charges against BitMEX were far from the first regulatory actions taken surrounding cryptocurrencies, they did demonstrate that regulators are not afraid of going after larger players. The founders of BitMEX have disputed the charges and their defense will likely argue that BitMEX leadership acted in compliance with the information available in an effort to shift blame to a lack of regulatory clarity.

CFTC chairman Heath Tarbert admitted during an LA blockchain summit on Monday that crypto regulation has fallen behind the industry and committed to promoting innovation in the space.

"I see my role as a regulator as not so much innovating ourselves, but we want to be innovative for a regulator, but not necessarily innovate for the community, but we've gotta keep up," Tarbert said during the event.

While Tarbert committed to promoting innovation, the United States' enforcement actions have steered companies like Bybit away from the country. Zhou expressed that the platform would like to expand into the United States, but not until there is regulatory certainty in the crypto market.

He added that much of the crypto infrastructure is borrowed from traditional finance, so regulators could adapt rules already in place for cryptocurrencies and blockchain.

"In crypto what we see is nothing new, it's all borrowed from the traditional space: the swap, the perpetual contract, the whole DeFi concept that seems to be getting extremely popular, the AMM, that's all been in the traditional space for many years," Zhou said. "We're baking the same bread, but taking the place to a very new territory. So if the regulators really want to tackle it they can just use whatever they have already and then implement it onto crypto."

While Bybit's official policy bans traders in the United States, there are loopholes which citizens can leverage to trade on the exchange. For example, users in the United States can use the wallets of friends living in other countries to skirt around the exchange's ban.

"The biggest problem even with KYC is it's kind of useless because crypto is not like a traditional banking system where you make the deposit and we can check whether the deposit is coming out of your bank," Zhou said.

Lawmakers will need to work with industry professionals to catch loopholes like these, but they will need to be incentivised to put in the time. Increasing demand for these products could be a pathway to encouraging regulatory clarity. Zhou believes the key to onboarding new clients is creating quality products.

"We believe the industry will get bigger and bigger, so what should Bybit be doing to help this mass adoption? We think there simply needs to be good products. Products that can be massively used," Zhou said.

In order to answer that call for quality products, Bybit will begin trialling a suite of new products including investment products or smart trading products to widen the company's client pool.

"For Bybit we are completely in the track of derivatives, crypto is already a niche market and derivatives are a niche market, so our client pool is quite limited," Zhou said. "You see growth, a lot of it is BitMEX clients and obviously in the beginning we were targeting derivatives products, but at the end of the day the client pool in this space is not so great."

Bybit is also looking into facilitating faster withdrawals. Currently withdrawals are processed manually by Bybit leadership. The founders have the keys to a multisig and all company data is locked in cold storage to prevent hacking. 

While this is a secure way to handle business, the founders sacrifice efficiency. Bybit is currently looking into custodian services, primarily Fireblocks. Zhou said the company plans to trial with Fireblock's hot wallet service so that by the end of the year Bybit can launch instant withdrawals.

Innovation is happening at a rapid pace across the cryptocurrency market, but regulatory drag in the United States means companies like Bybit are unable to engage the market and that US clients could miss out on new products. 

By Emily Mason

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