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Bitcoin miners hedging with recent sell-offs – Bitfinex report

All-time high hashrates and mining difficulty indicates that miners are bullish on Bitcoin, while recent sell-offs could be a means to hedge positions.

Bitcoin (BTC) mining companies are employing derisking strategies by offloading Bitcoin to exchanges, according to a market report from Bitfinex.

The cryptocurrency trading platform’s latest newsletter addresses the Bitcoin mining sector at length, highlighting a recent surge in miners selling large volumes of BTC to exchanges. This has led to a corresponding increase in value of shares in Bitcoin mining companies as institutional interest in BTC picks up in 2023.

The report notes that Poolin has accounted for the highest amount of BTC sold to the market in recent weeks. Bitfinex analysts also note that the Bitcoin mining difficult recently hit an all-time high, which it labels as an indicator of “robustness and miner confidence”:

“Miners are clearly bullish on Bitcoin as they commit more resources to mining, hence triggering the mining difficulty, but they are hedging their position, hence the despatch of more Bitcoin to exchanges.

The report goes on to suggest that miners are hedging positions on derivatives exchanges, with 70,000 BTC in 30-day cumulative volume transferred in the first week of July 2023.

Related: Bitcoin miners raked $184M in fees in Q2, surpassing all of 2022

While miners historically transfer BTC to exchanges using derivatives as a hedge for large spot positions, the report labels the high volumes as uncharacteristic:

"A transfer to exchanges on this scale is extremely rare and potentially showcases new miner behaviour.”

Bitfinex also cited data from Glassnode that indicated that Poolin has been responsible for a large portion of this activity, with the BTC mining pool offloading BTC to Binance.

The analysts note that several plausible reasons could be behind recent mining behaviour. This could include hedging activities in the derivatives market, carrying out over-the-counter orders or transferring funds through exchanges for other reasons.

Bitcoin mining difficulty and corresponding market price. Source: Blockchain.com

The increase in mining difficulty is also indicative of new mining power being added to the Bitcoin network. Analysts suggest that this is seen as a sign of increased network health, as well as increased confidence in the profitability of mining, either by increased BTC prices or improved hardware.

“Thus, miners are at a peculiar situation where they are rapidly increasing their mining potential as the Bitcoin halving inches closer whilst simultaneously hedging their exposure to an extent which is higher and more cautious than previous cycles.”

The report also suggests that on-chain Bitcoin movements reflect a transfer of supply from long-term holders to short-term holders. This investor behavior is said to be commonly seen in bull market conditions, as new market traders look for quick profits while long-term holders capitalize on increased prices.

Cointelegraph has reached out to a handful of mining companies and pools to ascertain why Bitcoin outflows from miners have increased over the past month. As recently reported, miners sent over $128 million in revenue to exchanges at the end of June 2023.

Magazine: Bitcoin is on a collision course with ‘Net Zero’ promises

Bitcoin Technical Analysis: BTC Consolidation Points to Potential Shifts Ahead

First Bitcoin futures contract debuts in Argentina

According to Matba Rofex, the trading platform behind the investment vehicle, the first Bitcoin futures contract in Latin America has begun trading.

Argentina welcomed its first Bitcoin (BTC) futures contract on July 13, just three months after the country's securities watchdog approved the underlying index as part of a strategic innovation agenda.

According to Matba Rofex, the trading platform behind the investment vehicle, it is the first Bitcoin futures contract in Latin America. In a futures contract, buyers bet on the future price of a commodity or other asset, such as Bitcoin. Under the contract, buyers and sellers are obligated to purchase and sell the asset at a predetermined future date.

Argentina's securities regulator, the Comisión Nacional de Valores (CNV), approved the Bitcoin futures index in April as part of an innovative agenda to encourage public-private collaboration for new financial products.

The Bitcoin futures contract will be based on the price of BTC quoted by several market participants providing BTC/ARS trading pairs. All trades will be settled with Argentine pesos, and traders are required to make deposits through bank transfers.

According to local media reports, the product will initially be available only to institutional investors. There's no clear timeline for when retail investors can trade Bitcoin futures contracts in the country. With the futures index, qualified investors can gain BTC exposure in a transparent, regulated environment.

Argentinians have turned to Bitcoin to keep pace with hyperinflation in the country. Argentina's annual inflation rate soared 114% in May from a 108% jump in April 2023, hitting the highest level since 1991, according to Trading Economics.

Argentina annual inflation rate. Source: Trading Economics. 

Another Bitcoin futures contract should be soon available in the region, as regulators in Brazil are evaluating a similar investment vehicle backed by the local stock exchange B3. Initially scheduled to debut on June 30, the crypto futures contract is now expected to go live on September 30. This is the second time the product release has been delayed.

Bitcoin futures premiums reached its highest level in 18 months on July 4, jumping 3.2% from the previous week. With the surge in BTC derivatives demand, traders question whether the market is experiencing "excessive excitement" or is returning to normal after a prolonged bear market, Cointelegraph reported.

Magazine: $3.4B of Bitcoin in a popcorn tin — The Silk Road hacker’s story

Bitcoin Technical Analysis: BTC Consolidation Points to Potential Shifts Ahead

UK Treasury plans to exclude derivatives and ‘unbacked’ tokens from regulatory sandbox

“Until there is more certainty in these frameworks, we are intending to utilise existing regulatory initiatives to develop policy and regulation for this asset class,” said Treasury.

The treasury department of the United Kingdom has proposed excluding unbacked cryptoassets and derivatives from its plans for a Digital Securities Sandbox.

In a consultation paper released on July 11, HM Treasury said the regulatory sandboxes which will be established under the country’s Financial Services and Markets Act will provide the U.K. government the time to modify existing legislation, if needed, for crypto products. The proposed framework was aimed at giving firms the opportunity to operate as parliament considers where its products or services may fall under existing regulations.

However, according to the consultation paper, these considerations may not extend to “unbacked cryptoassets” for which regulations were “still evolving” as well as derivatives. Treasury said it would consider feedback on its proposed digital securities sandbox until the consultation ends in August 2023.

The framework suggested that assets including Bitcoin (BTC) and Ether (ETH) may not qualify under the Treasury initiative. U.K. lawmakers have previously labeled the cryptocurrencies as “unbacked” and argued for them to be treated as gambling.

“Until there is more certainty in these frameworks, we are intending to utilise existing regulatory initiatives to develop policy and regulation for this asset class,” said Treasury, in reference to unbacked tokens.

Related: UK Law Commission recommends ‘distinct’ legal category for crypto

Under the Financial Services and Markets Act, crypto companies operating in the U.K. will have to comply with certain guidelines aimed at promoting innovative technologies while protecting consumers. The country’s Financial Conduct Authority issued a warning to firms that the framework would allow only “four routes to lawfully communicate cryptoasset promotions” starting in October 2023.

Magazine: Crypto regulation: Does SEC Chair Gary Gensler have the final say?

Bitcoin Technical Analysis: BTC Consolidation Points to Potential Shifts Ahead

OPNX launches ‘oUSD’ credit currency for crypto margin trading

The new “credit currency” will allow users to rely on cryptocurrencies as collateral without needing to obtain loans from other institutions.

Crypto futures exchange OPNX has launched a credit currency for margin trading, according to a July 5 statement made to Cointelegraph from the exchange’s co-founder, Mark Lamb. Called “oUSD,” the currency is available in its “phase 1” iteration, meaning that users cannot receive it without depositing crypto assets into the exchange. 

In a future “phase 2” version, the platform intends to make oUSD available to users who deposit crypto into on-chain contracts to allow for possible “bankruptcy remoteness,” Lamb stated.

In the currency’s litepaper, oUSD is identified as a solution to three problems. First, lenders do not want to trust platforms to hold cash loans backed by crypto collateral. Second, exchanges and lending platforms don’t want to lend cash to margin traders, as this practice led to multiple bankruptcies during the 2022 bear market. Third, crypto derivatives traders want “portfolio margin,” or the ability to borrow and trade based on their crypto holdings rather than their stablecoin holdings.

To solve this problem, oUSD exists as a “credit currency.” It can be purchased at a 1-to-1 ratio with Tether (USDT) or used to measure profit and loss when users rely on Bitcoin (BTC), Ether (ETH) or other cryptocurrencies as collateral. Users with a negative oUSD balance must pay an interest rate determined by holders of the platform’s native token, OX. Users who have a positive balance cash out by redeeming it for USDT.

OPNX user interface. Source: OPNX

In a conversation with Cointelegraph, Lamb claimed that users would eventually be able to acquire oUSD by staking cryptocurrency within smart contracts outside the platform. This will allow them to have bankruptcy remoteness, protecting them from any possible insolvency at the exchange.

“The problem with most exchanges is that [...] you’re the broker, the exchange, the ATS, the reporting agent, you're every leg in the financial interaction," Lamb stated, further explaining:

“If we can instead remove that custodial aspect and put that custody on-chain, we end up with a system where users have provable solvency, and they know that their collateral is not being touched. [...] And so you give users that bankruptcy remoteness, that protection of their assets, they then are able to trade on a safer exchange.”

Related: Kyle Davies to donate future OPNX earnings to 3AC creditors for ‘karma’

OPNX has been controversial since its inception, as two of its co-founders, Kyle Davies and Su Zhu, were also the co-founders of failed hedge fund Three Arrows Capital. The exchange has been so heavily criticized that its CEO, Leslie Lamb, has scolded investors for allegedly misleading the public by distancing themselves from it.

In response to a question about this criticism, Lamb argued that Davies’ and Zhu’s mistakes have helped them make OPNX a better exchange.

“I think Kyle and Su kind of portrayed the zeitgeist of the last crypto bull market well, and they lost the majority of their net worth, but they are building back, and that’s what I am doing as well, and that’s what everyone should do, [...] is just build back.”

Bitcoin Technical Analysis: BTC Consolidation Points to Potential Shifts Ahead

CFTC commissioner says proposal to reassess risk management could consider crypto

Christy Goldsmith Romero pointed to the collapse of FTX, Terra and Celsius in having the CFTC reconsider the way it handled risk management.

Christy Goldsmith Romero, a commissioner with the United States Commodity Futures Trading Commission (CFTC), has commented on a proposal amending the government body’s Risk Management Program with respect to digital assets.

In a June 1 notice, the CFTC said it would be opening a proposed rule change for amendments to its risk management requirements applicable to swap dealers and futures commission merchants. Romero said in a public statement that the proposal could allow the commission to address risks associated with certain crypto investments, citing the failure of Silvergate Bank.

“These technological advancements, with their accompanying risks, necessitate the Commission revisiting our regulatory oversight, including our risk management requirements,” said Romero. “Existing Commission rules require that banks’ and brokers’ risk management programs ‘take into account’ risks related to lines of business. That could include, for example, digital asset markets.”

According to the commissioner, the potential interest of brokers in the crypto derivatives market could “carry additional risks.” She pointed to the collapse of crypto exchange FTX as well as Terra and Celsius, along with areas with “rampant fraud and illicit finance.”

“Evolving technologies like digital assets, artificial intelligence, and cloud services, also have emerged as areas that can carry significant risk.”

The CFTC will leave the proposal open for public comment for 60 days following publication in the Federal Register. After that time, the commission could introduce a formal rule change leading to a vote among its leadership.

Related: ETH can be both a security and a commodity, former CFTC commissioner says

Since being sworn into office in March 2022, Commissioner Romero has often acted as a crypto-friendly voice in the CFTC, calling for oversight to ensure investor protection and public trust. In April, she proposed the CFTC reduce the anonymity of certain tokens in order to better manage the risks associated with digital assets.

Magazine: Crypto regulation: Does SEC Chair Gary Gensler have the final say?

Bitcoin Technical Analysis: BTC Consolidation Points to Potential Shifts Ahead

US CFTC issues letter on digital asset derivatives, clearing compliance in 3 areas

The letter is a reminder, but a highly specific one that is reminiscent of the SEC’s recent custody rule proposal in part.

The United States Commodity Futures Trading Commission (CFTC) has issued a staff advisory letter to registered derivatives clearing organizations (DCOs) and DCO applicants, reminding them of the risks associated with expanding the scope of their activities. The letter from the CFTC Division of Clearing and Risk (DCR) specifically addressed digital assets.

Staff advisory letters can remind addressees of their legal obligations or provide clarity on those obligations. The “DCR expects DCOs and applicants to actively identify new, evolving, or unique risks and implement risk mitigation measures,” it said, continuing:

“Over the past several years, DCR has observed increased interest […] in expanding the types of products cleared and business lines, clearing models, and services offered by DCOs, including related to digital assets.”

The DCR said it will emphasize compliance in three areas: system safeguards, conflicts of interest and physical deliveries. Systems safeguards require attention because of the “heightened cyber and other operational risks” associated with digital assets. Potential conflicts of interest were seen in “dependencies on affiliated entities or services (i.e., dual-hatted executives, shared systems and resources, etc.).”

Related: CFTC proposes reducing anonymity to manage risks

“Physical delivery” is used in the letter in its technical sense to mean the transfer of ownership rights — that is, transferring digital assets from one account or wallet to another. This concern, in part, mirrors the U.S. Securities and Exchange Commission’s reported plans to propose a new rule that would impact crypto firms serving as custodians of their clients’ assets. That proposal brought on harsh criticism in the crypto sector.

Alexander Grieve, vice president of the Tiger Hill Partners communications firm, noted in a tweet that Bitnomial has a DCO application before the CFTC. LedgerX, recently purchased by MIAX from FTX, is also a CFTC-regulated clearinghouse.

Magazine: Crypto regulation: Does SEC Chair Gary Gensler have the final say?

Bitcoin Technical Analysis: BTC Consolidation Points to Potential Shifts Ahead

Bitcoin, Ethereum bears are back in control — Two derivative metrics suggest

Given the uncertainty in the macroeconomic environment, Bitcoin price bulls have no reason to bet against a six-week descending wedge pattern.

A bearish market structure has been pressuring cryptocurrencies’ prices for the past six weeks, driving the total market capitalization to its lowest level in two months at $1.13 trillion. According to two derivative metrics, crypto bulls will have a hard time to break the downtrend, even though analyzing a shorter timeframe provides a neutral view with Bitcoin (BTC), Ether (ETH) and BNB, on average, gaining 0.3% between May 12 and May 19.

Total crypto market cap in USD, 12-hour. Source: TradingView

Notice that the descending wedge formation initiated in mid-April could last until July, indicating that an eventual break to the upside would require an extra effort from the bulls.

Furthermore, there’s the impending U.S. debt ceiling standoff, as the U.S. Treasury is quickly running out of cash.

Even if the majority of investors believe that the Biden administration will be able to strike a deal before the effective default of its debt, no one can exclude the possibility of a government shutdown and subsequent default.

Gold or stablecoins as a safe haven?

Not even gold, which used to be considered the world’s safest asset class, has been immune to the recent correction, as the precious metal traded down from $2,050 on May 4 to the present $1,980 level.

Related: Bitcoin, gold and the debt ceiling — Does something have to give?

Circle, the company behind the USDC stablecoin, has ditched $8.7 billion in Treasuries maturing in longer than 30 days for short-term bonds and collateralized loans at banking giants such as Goldman Sachs and Royal Bank of Canada.

According to Markets Insider, a Circle representative stated that:

“The inclusion of these highly liquid assets also provides additional protection for the USDC reserve in the unlikely event of a U.S. debt default.”

The stablecoin DAI, managed by the decentralized organization MakerDAO, approved in March an increase to its portfolio holdings of the U.S. Treasuries to $1.25 billion to “take advantage of the current yield environment and generate further revenue”.

Derivatives markets show no signs of bearishness

Perpetual contracts, also known as inverse swaps, have an embedded rate that is usually charged every eight hours.

A positive funding rate indicates that longs (buyers) demand more leverage. Still, the opposite situation occurs when shorts (sellers) require additional leverage, causing the funding rate to turn negative.

Perpetual futures accumulated 7-day funding rate on May 19. Source: Coinglass

The seven-day funding rate for BTC and ETH was neutral, indicating balanced demand from leveraged longs (buyers) and shorts (sellers) using perpetual futures contracts. Curiously, even Litecoin (LTC) displayed no excessive long demand after a 14.5% weekly rally.

To exclude externalities that might have solely impacted futures markets, traders can gauge the market’s sentiment by measuring whether more activity is going through call (buy) options or put (sell) options.

BTC options volume put-to-call ratio. Source: Laevitas.ch

The expiration of options can add volatility to Bitcoin’s price, which resulted in an $80-million advantage for bears in the latest May 19 expiry.

A 0.70 put-to-call ratio indicates that put option open interest lags the more bullish calls and is, therefore, bullish. In contrast, a 1.40 indicator favors put options, which can be deemed bearish.

The put-to-call ratio for Bitcoin options volume has been below 1.0 for the past couple of weeks, indicating a higher preference for neutral-to-bullish call options. More importantly, even as Bitcoin briefly corrected down to $26,800 on May 12, there was no significant surge in demand for the protective put options.

Glass half full, or investors prepping for the worst?

The options market shows whales and market makers unwilling to take protective puts even after Bitcoin crashed 8.3% between May 10 and May 12.

However, given the balanced demand on futures markets, traders seem hesitant to place additional bets until there’s more clarity on the U.S. debt standoff.

Less than two weeks remain until June 1, when the U.S. Treasury Department has warned that the federal government could be unable to pay its debts.

Related: U.S. debt ceiling crisis: bullish or bearish for Bitcoin?

It is unclear whether the total market capitalization will be able to break from the descending wedge formation. From an optimistic perspective, professional traders are not using derivatives to bet on a catastrophic scenario.

On the other hand, there seems to be no rationale for th bulls to jump the gun and place bets on a speedy crypto market recovery given the uncertainty in the macroeconomic environment. So, ultimately, bears are in a comfortable place according to derivatives metrics.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Bitcoin Technical Analysis: BTC Consolidation Points to Potential Shifts Ahead

How are Bitcoin options traders positioning for the US banking crisis?

The total crypto market cap has been ranging sideways, but Bitcoin derivatives markets indicate pro traders don't expect any major price corrections.

For the past 14 days, cryptocurrency markets have been trading within an unusually tight 7.1% range. In other words, investors are unwilling to place new bets until there’s additional regulatory clarity, especially in the United States.

The total crypto market capitalization fell by 1% to $1.2 trillion over the seven days ending May 4, primarily as a result of Bitcoin's (BTC) 1.1% price decline, Ether's (BTC) 0.2% loss, and BNB trading down 1.4%.

Total crypto market cap in USD, 12-hour. Source: TradingView

Notice that the exact same $1.16 trillion to $1.22 trillion total market cap range previously stood for twelve days between March 29 and April 10. The conflicting forces: regulatory uncertainty weighing it down and the banking crisis pushing prices upward are likely the reason for the lack of risk-appetite on both sides.

SEC’s crypto crackdown could backfire

The Coinbase exchange, for instance, has been battling the U.S. Securities and Exchange Commission (SEC) regarding the need for clear rules for trading digital assets. The stakes were raised after the exchange was handed a Wells notice, a "legal threat" for "possible violations of securities laws", on March 22.

However, the latest decision has been favorable to Coinbase, as the court has instructed the SEC to clarify the security rules for digital assets within ten days.

On the other hand, the banking crisis seems not to have faded after the lender PacWest Bancorp reportedly announced that it was considering a buyout. The regional financial institution held $40 billion in assets, although some 80% of the loan book is dedicated to the commercial real estate and residential mortgages — a sector that has been plagued by rising interest rates.

The recent crypto sideways trend suggests that investors are hesitant to place new bets until there’s more clarity on whether the U.S. Treasury will continue injecting liquidity to contain the banking crisis, which favors inflation and positive momentum for scarce assets.

BTC, ETH derivatives show muted demand from bears

Perpetual contracts, also known as inverse swaps, have an embedded rate that is usually charged every eight hours. Exchanges use this fee to avoid exchange risk imbalances.

A positive funding rate indicates that longs (buyers) demand more leverage. However, the opposite situation occurs when shorts (sellers) require additional leverage, causing the funding rate to turn negative.

Perpetual futures accumulated 7-day funding rate on May 4. Source: Coinglass

The seven-day funding rate for Bitcoin and Ether was neutral, indicating balanced demand from leveraged longs (buyers) and shorts (sellers) using perpetual futures contracts. BNB was the only exception, as shorts have been paying 1.4% per week to keep their positions open indicating bearishness.

To exclude externalities that might have solely impacted futures’ markets, traders can gauge the market's sentiment by measuring whether more activity is going through call (buy) options or put (sell) options. Generally speaking, call options are used for bullish strategies, whereas put options are used for bearish ones.

The expiration of options can have a significant impact on the market, particularly if there are a large number of contracts involved. When options contracts expire, the holders of these contracts may choose to exercise their rights, which can result in buying or selling pressure on the underlying asset. This can lead to increased volatility in the price of Bitcoin, which resulted in a $575 million advantage for bulls in the latest April 28 expiry.

A 0.70 put-to-call ratio indicates that put option open interest lags the more bullish calls and is, therefore, bullish. In contrast, a 1.40 indicator favors put options, which can be deemed bearish.

BTC options volume put-to-call ratio. Source: Laevitas.ch

The put-to-call ratio for Bitcoin options volume has been below 0.90 since April 26, indicating a higher preference for neutral-to-bullish call options. More importantly, even as Bitcoin briefly corrected down to $27,700 on May 1, there was no significant surge in demand for the protective put options.

Related: US regional bank shares sink despite Fed calling banking system ‘sound’

Traders pricing low odds of a break above $1.2T

The option market shows whales and market makers unwilling to take protective puts even after Bitcoin crashed 7.8% on May 1. However, given the balanced demand on futures markets, traders seem hesitant to place additional bets until there’s clarity on whether the U.S. Treasury will continue to bailout the troubled regional bank sector.

It is unclear whether the total market capitalization will be able to break through the $1.22 trillion barrier. But one thing is for sure: professional traders are not betting on a crypto price crash given that the demand for protective puts has been muted.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Bitcoin Technical Analysis: BTC Consolidation Points to Potential Shifts Ahead

Gemini to launch derivatives platform outside the United States

The platform's first derivatives contract will be a BTC perpetual contract denominated in Gemini dollars (GUSD), followed by an ETH/GUSD perpetual contract.

United States-based crypto exchange Gemini announced on April 21 the upcoming launch of a derivatives platform outside the U.S. The move comes amid a tightening and uncertain regulatory environment for crypto firms in the country. 

Dubbed Gemini Foundation, the offshore division will offer services to users based in Singapore, Hong Kong, India, Argentina, Bahamas, Bermuda, British Virgin Islands, Bhutan, Brazil, Cayman Islands, Chile, Egypt, El Salvador, Guernsey, Israel, Jersey, New Zealand, Nigeria, Panama, Peru, Philippines, Saint Lucia, Saint Vincent & Grenadine, South Africa, South Korea, Switzerland, Thailand, Turkey, Uruguay, and Vietnam. It will not offer services for customers in the United States.

The platform's first derivatives contract will be a Bitcoin (BTC) perpetual contract denominated in Gemini dollars (GUSD), followed by an ETH/GUSD perpetual contract shortly thereafter.

Eligible customers will be able to trade both spot and derivatives products, as well as convert USD and USD Coin (USDC) into GUSD on a 1:1 basis. Fees, profits and losses will also be processed in GUSD. The default leverage is set to 20x, with the maximum possible leverage at 100x.

Unlike traditional futures contracts, perpetual contracts never expire. Perpetual futures trading is not regulated by the Commodity Futures Trading Commission (CFTC). Exchanges offering crypto futures contracts, like BitMEX, are not available for U.S. customers.

Related: What are perpetual futures contracts in cryptocurrency?

The move comes a few days after Gemini revealed plans to establish a new engineering hub in India. The exchange's founders Tyler and Cameron Winklevoss recently announced "big plans for international growth this year in APAC.” Earlier this month, Gemini filed a pre-registration with the Ontario Securities Commission to become a restricted dealer in Canada.

Gemini has been scrutinized by U.S. authorities. New York State’s Department of Financial Services is reportedly investigating the exchange over claims that many users believed assets in their Earn accounts had been protected by the Federal Deposit Insurance Corporation.

Gemini's Earn program halted withdrawals in November, after its operating partner, Genesis, cited “unprecedented market turmoil.” In January, the firm filed for Chapter 11 bankruptcy. Reports at the time suggested that up to $900 million in Earn user funds could have been locked. The U.S. Securities and Exchange Commission also charged the exchange with offering unregistered securities through Earn in January.

Magazine: Best and worst countries for crypto taxes — Plus crypto tax tips

Bitcoin Technical Analysis: BTC Consolidation Points to Potential Shifts Ahead

CFTC chair says Binance intentionally broke rules concerning futures, commodities

The head of the CFTC, Rostin Behnam, recently spoke out against Binance and its leadership at a public-facing event held at Princeton University.

Rostin Behnam, Chairman of the Commodity Futures Trading Commission (CFTC), recently spoke out about the allegations levied against Binance, claiming that the beleaguered cryptocurrency exchange’s leadership knowingly operated outside of U.S. laws governing the exchange of commodities and futures. 

Speaking at a fireside chat that took place at the DeCenter Spring Conference at Princeton University on April 14, Bloomberg reports that Behnam told those in attendance that Binance leaders had intentionally flouted the rules concerning operations, including knowingly allowing U.S. citizens to participate on the exchange through the use of virtual private networks (VPNs) and other obfuscation tools.

“These are not unsophisticated individuals,” Behnam said at the event. “They are starting large companies and offering futures contracts and derivatives to U.S. customers.” The CFTC head later added “If you are going to offer futures contracts in the U.S., there is a clear understanding that you are registered with the CFTC and comply by the law.”

The comments stem from the CFTC’s lawsuit against Binance and its CEO Changpeng “CZ” Zhao for alleged trading violations. Per a report from Cointelegraph, “The CFTC is pressing seven counts for executing unregistered futures transactions, providing illegal commodities options, failure to register as a Futures Commission Merchant, Designated Contract Market or Swap Execution Facility, failure to supervise diligently or implement AML/KYC measures and law evasion.”

Related: Binance CEO CZ: Regulators need deep understanding of crypto for proper rules

The nuts and bolts of the CFTC’s suit against Binance — the exchange also faces legal action from the IRS and federal prosecutors — relies on supposed evidence that Binance and CZ continued onboarding U.S. customers despite a policy prohibiting such actions and that the company knowingly engaged in illegal futures trading, allegedly running the business afoul of U.S. anti-money-laundering laws.

It’s unclear at this time why the CFTC head would participate in what appears to be flippant public discussion of ongoing investigations. Binance, for its part, continues to assert its participation in good-faith efforts at global compliance.

Bitcoin Technical Analysis: BTC Consolidation Points to Potential Shifts Ahead