Hidden Road, a brokerage firm backed by Citadel Securities, has reportedly blocked access to the cryptocurrency exchange Bybit for its clients. The dispute is said to revolve around know-your-customer (KYC) and anti-money laundering (AML) procedures. This move comes as regulators worldwide are tightening regulations on cryptocurrency trading and exchanges to prevent money laundering.
Hidden Road informed its clients about the issue a few weeks ago, and the decision to cease access was triggered by a disagreement with Bybit regarding its KYC and AML requirements, which aim to adhere to international best practices. The exact details of the dispute and the firms’ differing stances on anti-laundering measures remain unclear.
According to anonymous sources cited by Bloomberg, Bybit has initiated a “comprehensive compliance review” of its brokerage business. This comes as regulators have been increasing their scrutiny of crypto exchanges, following Binance and CZ’s failure to fully comply with anti-money laundering laws, resulting in their agreement with the U.S. Department of Justice.
Binance, after its $4.3 billion settlement with U.S. authorities last year, subsequently requested that prime brokers like FalconX and Hidden Road enforce stricter checks. Bybit has not provided specific details on the matter but has stated its commitment to transparency and will provide updates as the review progresses.
The dispute has affected some users, with disgruntled clients expressing a preference for accessing crypto through trusted companies or brokers. Regulators in the U.S., such as the SEC, have accused Binance of allowing U.S.-based clients to trade on the international exchange through offshore entities without following the necessary controls required by U.S. law. Since the lawsuit and investigation against Binance, Binance.US, CZ, and other crypto exchanges have seen an increase in market size.
OKX and Bybit have reportedly experienced a surge in crypto trading due to high demand. Cryptocurrency companies and exchanges have also relocated offshore due to strict regulations in various regions.
Hidden Road provides prime brokerage services for digital asset markets and foreign exchange. Last month, the firm was reportedly planning to raise $120 million in a series B equity round.
Source: Cryptopolitan, Reporting by Enacy Mapakame
