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Roubini Ratchets Up Rhetoric, Accuses BitMEX of Profiting from Terrorism

Last Updated March 4, 2021 2:38 PM
Jose Antonio Lanz
Last Updated March 4, 2021 2:38 PM

Following a heated debate against Arthur Hayes held on July 3 at the Asia Blockchain Summit, economist Nouriel Roubini wrote  an article sharply criticizing not only crypto but Hayes’ business scheme. While some of Roubini’s concerns are legitimate, his over-emotionality seems to cloud his arguments in some cases.

The article in which he pours out all his pessimism (and perhaps even rage) is not exempt from controversy and a few other subjectivities. In it, Roubini’s accusations quickly escalate, practically saying Hayes was benefiting from terrorism:

“BitMEX insiders revealed to me that this exchange is also used daily for money laundering on a massive scale by terrorists and other criminals from Russia, Iran, and elsewhere; the exchange does nothing to stop this, as it profits from these transactions.”

Roubini, BitMEX, and the Problem With Regulations

Roubini claims “crypto land has become an unregulated casino where unchecked criminality runs riot.” But a paper published  by economics professor Edgar L Feige – concluding that the majority of crime is financed with cash – can refute this. The U.S. Senate  and Europol also prove him wrong.

Nouriel Roubini and Arthur Hayes debating at Taipei
Nouriel Roubini and Arthur Hayes held a debate days before Roubini published his controversial article | Source: Bitmex

Another attack on BitMEX was based on the fact that this is an unregulated business. For this reason, it is easy to finance illegal activities:

“Hayes has denied this, but because BitMEX is totally unregulated, there are no independent audits of its accounts, and thus no way of knowing what happens behind the scenes.”

Roubini’s fault is to think that the United States is the only country in the world. BitMEX is not “totally unregulated.” Each business decides to settle where the laws are most convenient. This is not illegal and has always been the case.

If Roubini were right, one would have to ask: Why are there so many corporations and wealthy people around the world putting their money in accounts from Switzerland, the Bahamas, or any other tax haven?

Is BitMEX’s 100x Leverage a Threat?

Roubini kept on saying that BitMEX supports up to 1:100 leverage. These types of operations are hazardous, and in many cases, BitMEX clients get involved in transactions without being fully aware of the risks.

“Arthur Hayes, boasted openly that the BitMEX business model involves peddling to “degenerate gamblers” (meaning clueless retail investors) crypto derivatives with 100-to-one leverage…It is little wonder that, according to one independent researcher’s estimates, liquidations at times account for up to half of BitMEX’s revenue.”

And while it is true that consumers should have more education when engaging in these risky operations, there is also no denying that the responsibility for making a trade is exclusive to each trader. BitMEX does not condition or force its users to operate with leverage, although it obviously benefits from the failure of those who willingly participate in these type of trades.

In fact, Roubini criticizes Hayes for enabling trades at 100x leverage but does not criticize, for example, those who gamble at a casino with the risk of losing more money than they would from trading on BitMEX. Getting more serious, he doesn’t talk about some high-leverage Forex brokers that go far beyond 100x while also being “properly regulated.”

The Fight Isn’t Over

So far, Arthur Hayes doesn’t appear to have responded to Roubini’s article.

His last tweet, however, addressed his “meltdown” in the recent debate in Taipei.