U.S. Crypto Traders Evade Offshore Exchange Bans – The Wall Street Journal

Americans are circumventing bans intended to stop U.S. customers from accessing overseas cryptocurrency exchanges, new research suggests.

A report released Friday found that hundreds of Americans are trading risky crypto derivatives on offshore exchanges such as FTX and Binance. The report sheds light on an open secret in the industry: U.S. crypto enthusiasts can easily bypass measures that seek to block them from offshore exchanges.

Crypto derivatives allow traders to place leveraged bets on whether bitcoin, dogecoin or other digital currencies will rise or fall. In the U.S., such products are regulated by the Commodity Futures Trading Commission. By operating outside of the U.S. and not serving American clients, exchanges can avoid numerous CFTC rules, including investor-protection requirements and safeguards against money laundering and market manipulation.

“U.S. customers will likely have little or no protection if they trade with unregistered firms that operate outside the U.S.,” the CFTC said in an emailed statement.

The report was written by Inca Digital, a data firm whose technology is used by the CFTC for investigations and market surveillance.