Citadel-Linked Firm Allegedly Halts Collaboration with Major Crypto Exchange, Impacting Market Sentiment on BTC and ETH

• Citadel Securities-backed brokerage firm Hidden Road has ceased offering access to Bybit, the world’s third-largest cryptocurrency exchange by volume.
• This decision stems from a disagreement between the two companies over Bybit’s Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements.
• Regulators in the U.S. and other countries are intensifying scrutiny on crypto exchanges to ensure they are not used for money laundering or sanctions evasion.

Hidden Road halts access to Bybit over compliance issues, reflecting growing regulatory scrutiny in the crypto space.

Hidden Road Ceases Access to Bybit

Hidden Road, a brokerage firm financed by Citadel Securities, has decided to stop offering its clients access to Bybit, the third-largest cryptocurrency exchange by volume. This move was communicated to clients a few weeks ago and is reportedly due to disagreements over Bybit’s KYC and AML protocols.

Regulatory Scrutiny Intensifies

Regulators in the U.S. and other countries are ramping up their scrutiny of cryptocurrency exchanges to ensure they are not being used for illicit activities such as money laundering or evading sanctions. The U.S. government has expressed concerns that digital assets could be used by countries like Russia and Iran to circumvent financial sanctions imposed by Western nations.

Bybit’s Response to Compliance Issues

In response to Bloomberg News inquiries, Bybit, which is based in Dubai, announced that it has initiated a “comprehensive compliance review” of its primary brokerage operations. This review aims to ensure adherence to relevant regulations and to improve the customer onboarding process by intermediaries. However, Bybit did not comment specifically on its relationship with Hidden Road.

Bybit’s Commitment to Transparency

A spokesperson for Bybit stated, “Bybit will not comment on specific questions regarding counterparties at this time. However, the company is committed to transparency and will provide further updates as the review progresses.” This statement underscores Bybit’s dedication to maintaining regulatory compliance and transparency in its operations.

Implications for the Crypto Market

The exact nature of the disagreement between Hidden Road and Bybit over KYC and AML procedures remains unclear. Primary brokers, which offer services such as trade execution, clearing, and financing, are crucial liquidity providers in the digital asset market. Binance, the largest exchange, accounts for nearly half of global spot trading volumes.

According to CoinGecko data, Bybit established a new hub in Dubai last year and captured 8.2% of the market, making it the third-largest centralized crypto exchange in the first quarter.

Conclusion

The cessation of Hidden Road’s services to Bybit highlights the increasing regulatory pressures faced by cryptocurrency exchanges. As regulators intensify their scrutiny, exchanges must ensure robust compliance with KYC and AML requirements to maintain their operations and credibility. This development serves as a reminder of the evolving landscape of the crypto market and the importance of regulatory adherence.