The CEO and CFO of the BitMEX cryptocurrency derivatives exchange announced in a Tuesday (Jan. 18) blog post that they have reached an agreement to buy a 268-year-old German bank in order to establish “a one-stop shop for regulated crypto products in Germany, Austria and Switzerland.”
The purchase of Munich-based Bankhaus von der Heydt, established in 1754, is a vital step in BitMEX’s goal of creating “a regulated crypto products powerhouse in the heart of Europe,” said BitMEX Group CEO Alexander Höptner in the post.
The deal will give BitMEX a base in Germany, Austria and Switzerland that is at once eminently respectable and deeply involved in the crypto financial world, which it calls Banking 2.0.
It’s a big change from a year ago, when the Seychelles-based derivatives exchange’s then-CEO Arthur Hayes and co-founders were indicted by the U.S. Department of Justice (DOJ), alleging they ignored anti-money laundering (AML) regulations and covered up dealings with Americans “in violation of its purported U.S. user ban.”
The post emphasized that the deal, which Höptner and CFO Stephan Lutz said they want to close by mid-2022, will only happen if approved by the Federal Financial Supervisory Authority (BaFin), Germany’s financial services regulator.
That is likely why the purchase of the bank will not be by BitMEX, but by a new German company, BXM Operations AG, founded and owned by Höptner and Lutz.
“Regulated” is a word Höptner returned to repeatedly in the blog post.
“Through combining the regulated digital assets expertise of Bankhaus von der Heydt with the crypto innovation and scale of BitMEX, I believe we can create a regulated crypto products powerhouse in the heart of Europe,” he said in the post.
Banking 2.0
Despite its long roots, Bankhaus von der Heydt claims to have been an early adopter of FinTech and blockchain technology, which is said “turns banking digital.”
Its services include crypto asset custody, tokenization solutions and a Luxembourg-based investment funds company.
“We are one of the first banks in Germany to have developed a range of services based on this new technology,” the bank’s website stated. “In this way, our clients can already benefit from Banking 2.0.”
That’s in its DNA, the bank said, noting that it carried out one of the country’s first securities issues, financing the expansion of the Prussian railway network in 1835.
Bankhaus von der Heydt also offers a range of traditional banking services, including the issuance and settlement of securities transactions, private equity investing and consulting, and corporate financing and mergers and acquisitions advisory services. Notably for the environmentally challenged cryptocurrency industry, the bank said it has “particular expertise in the energy, infrastructure and cleantech/waste management sectors.”
This is a history that BitMEX hopes will help push the deal through BaFin, which recently saw a pair of scandals when FinTechs and banking mixed in Germany. While neither was crypto-related, payments processor Wirecard and Greensill Banking both collapsed amidst fraud allegations. They were both permitted to acquire banks.
BitMEX Indictments
BitMEX has had substantial troubles of its own recently. An early and leading crypto derivatives exchange, BitMEX was known for using a very minimal know your customer (KYC) procedure and not monitoring transactions for money laundering violations.
That caught up to it in October 2020, when the DOJ indicted former CEO Arthur Hayes — a prominent figure in the crypto world — as well as BitMEX Co-Founders Ben Delo and Samuel Reed, and its head of Business Development, Gregory Dwyer. All four were charged with violating the Bank Secrecy Act and conspiring to violate the Bank Secrecy Act by failing to put sufficient AML safeguards in place.
The Commodity Futures Trading Commission (CFTC) filed an enforcement lawsuit against the company at the same time, alleging that it made more than $1 billion in fees while “operating an unregistered trading platform and violating multiple CFTC regulations, including failing to implement required anti-money laundering procedures.”
BitMEX owner 100x Group cut ties, implemented a strong AML program and brought in Höptner — who was at the time the CEO of German stock exchange Börse Stuttgart GmbH and its financial services provider, Euwax AG.
At the time, Höptner said in a press release that the “future of this industry will increasingly belong to those who provide a regulated trading environment that is innovative, liquid, and fair for institutional and retail investors alike.”
Whether his CV and Bankhaus von der Heydt’s pedigree and crypto experience will be enough to get by BaFin remains to be seen.
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