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CFTC Regulation Prevented Bitfinex From Using Cold Storage (imgur.com)

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[–]Liongrass[S] [スコア非表示]  (2子コメント)

Link to the full document

During the Relevant Period, Bitfinex did not actually deliver bitcoins purchased on a leveraged, margined, or financed basis to the traders who purchased them within the meaning of Section 2(c)(2)(D)(ii)(III)(aa) of the Act. Instead, Bitfinex held the purchased bitcoins in bitcoin deposit wallets that it owned and controlled. Therefore, Bitfinex engaged in illegal, off-exchange commodity transactions and failed to register as a futures commission merchant, in violation of Sections 4(a) and 4d of the Act, 7 U.S.C. §§ 6(a) and 6d.

tldr: If you hold your bitcoins in cold storage you are not "delivering" them, so instead you have to make on-chain transactions for each user, every day. And for that you have to keep your coins online.

[–]h4ckspett [スコア非表示]  (0子コメント)

Or you could just register as a futures commission merchant?

[–]w2qw [スコア非表示]  (0子コメント)

That has nothing to with cold storage. That's because they were operating futures trading without being registered.

[–]jabetizo [スコア非表示]  (2子コメント)

To be fair, Bitfinex claimed the multisig set up was more secure than cold storage.

[–]trowawayatwork [スコア非表示]  (1子コメント)

yeah on a per user basis. it all topples though with how that multisig thing is set up.

[–]dellintelbitcoin [スコア非表示]  (0子コメント)

Its like an inverse pyramid. Top layer very strong. But what does it matter if bottom layer is not? :p

[–]Sizematters96redditor for 1 month [スコア非表示]  (1子コメント)

Thanks CFTC for ruining my life

[–]Ignatius_G_Reilly [スコア非表示]  (0子コメント)

Bitfinex bragged that the multisig was much safer than cold storage. Sorry, you don't get to rage against the gubbamint this time.

[–]i_am_canadian_ [スコア非表示]  (3子コメント)

Wait so this regulation would technically prevent all exchanges dealing with the US from having a cold wallet?

[–]Liongrass[S] [スコア非表示]  (2子コメント)

only those that offer leveraged, margined or financed products

[–]btcluvr [スコア非表示]  (0子コメント)

CFTC pushes for regulation -> bitfinex gets into legal trouble with the US -> bitfinex decides to "get hacked" and get out of it all.

[–]icecoldbaby [スコア非表示]  (0子コメント)

fuck you CFTC

[–]venzen [スコア非表示]  (1子コメント)

The last sentence above the highlighted paragraph:

Bitfinex was not registered with the Commission [CFTC]

Indeed, how could they? - why would they? Bitfinex is based in Hong Kong and the CFTC's regulatory authority does not extend to sovereign territories outside the USA.

[–]bitcoin_permabull [スコア非表示]  (0子コメント)

The US regulatory regime / authority does extend to sovereign territories outside the USA. Just ask BNP Paribas.

[–]BitBargain [スコア非表示]  (0子コメント)

Instead, Bitfinex held the purchased bitcoins in bitcoin deposit wallets that it owned and controlled

This time they didn't own the coins, they just controlled the coins.

Bitcoin: whoever controls it, owns it.

I'm not sure if this document actually 'forced' Bitfinex not to have cold storage. Does the regulation really prevent cold storage? If so, isn't Kraken affected by it as well?

[–]GandalfBitcoin [スコア非表示]  (0子コメント)

Government tell you to eat SHIT, so you eat SHIT?

The Bitfinex incident had nothing related to CFTC, because CFTC did not ask them to put all bitcoins in hot wallet. Actually Bitgo and Bitfinex chose this solution together.

[–]theecoinomist [スコア非表示]  (0子コメント)

It seems it might be time for the ETHF crowd to fork once again