The world’s largest cryptocurrency exchange has been banned from operating in the UK and has until Wednesday to comply with the financial watchdog’s ruling.
Cayman Islands-based Binance, which allows customers around the world to trade cryptocurrencies like Bitcoin and related derivatives, such as futures, has been ordered to stop “all regulated activity. In the UK under its subsidiary Binance Markets Limited.
The Financial Conduct Authority’s ruling is the latest crackdown on the crypto industry.
Various regulators are increasingly concerned about the potential role of cryptoassets in illegal activities such as money laundering, as well as the poor protection of investors as they become more popular.
Crackdown: Binance Markets Ltd ordered to stop “all regulated activity” in UK
Due to the ban, Binance Markets “is currently not permitted to undertake regulated activities without the prior written consent of the FCA,” the watchdog said.
The FCA does not regulate the cryptocurrencies themselves, but it does regulate the financial products linked to them, which is presumably the activity that the FCA clamps down on.
Laith Khalaf, financial analyst at AJ Bell, said: “Binance’s website offers derivatives with up to four times the leverage of a range of extremely volatile cryptocurrencies, which means that the gains and the losses are multiplied by four.
“It’s no surprise that such extremely risky products have come under regulatory scrutiny. ”
Since January, the FCA has banned the sale of derivatives and exchange-traded notes that track cryptocurrencies like bitcoin and ethereum to retail investors after concluding they risk “sudden and unexpected” losses.
The regulator has also introduced the obligation for all companies offering cryptocurrency-related services to register with them and show that they comply with anti-money laundering rules.
Binance had applied to become an FCA registered company – but it abandoned its application last month. This means that it cannot function as a cryptocurrency exchange in the UK.
Earlier this month, the FCA said only five companies had registered and the majority were not yet compliant.
What does the ban mean for UK customers with a Binance account?
What this means for UK investors is unclear.
Although Binance cannot offer a UK-based crypto exchange, UK investors can still access the group’s services through its Binance.com website.
Binance said the FCA UK notice had “no direct impact” on the services provided on Binance.com.
“BML is a separate legal entity and does not offer any products or services through the Binance.com website,” the group tweeted.
He added: “We take a collaborative approach in working with regulators and we take our compliance obligations very seriously. We actively keep abreast of changes in policies, rules and laws in this new space. ‘
Bitcoin Today: Crypto Has Raised Despite Announcement Of Banning Of Binance’s British And Japanese Subsidiaries
But the FCA has issued a warning regarding the Binance.com platform, advising people to be wary of online and social media ads promising high returns on crypto-asset investments.
And he told Binance that by Wednesday, June 30, it must post a notice on its website and social media warning customers that it is not allowed to “undertake any regulated activity in the UK.” .
The company must also remove all advertising and financial promotions aimed at UK consumers.
Additionally, Binance must secure and retain all records relating to UK consumers and notify the FCA that this was done before July 2.
David Henderson, senior partner at financial services law firm Browne Jacobson, said the impact on UK clients with Binance accounts was not yet clear.
“We expect the FCA to take a very close look at Binance’s website and the products offered and if it determines that any regulated products are offered or promoted ‘in the UK’ (which is subject to interpretation), we believe the FCA could demand that Binance’s website block UK consumers from accessing these products, ”he said.
Binance is based in the Cayman Islands and is led by founder and CEO Changpeng Zhao. Binance Markets Ltd is its UK branch and is legally based in London.
Crypto crackdown will accelerate
Binance was also banned by Japan’s financial watchdog on Friday, when it said the company was not registered to do business in the country.
And last month Bloomberg reported that U.S. officials investigating money laundering and tax crimes sought information from people with insight into Binance’s business.
Regulators are cracking down on cryptoassets, fearing they may contribute to fraud and money laundering. They also fear that investors could be exposed to big losses.
Bitcoin has risen despite the latest crackdown, with the cryptocurrency rising about 5% to around $ 34,800 at 9:30 a.m. Monday.
Last week it fell below $ 29,000 for the first time since the start of the year. Since last October, bitcoin has gone from around $ 10,000 to over $ 63,000 in April.
Khalaf said the latest crackdown on Binance was not going to “knock out the crypto craze,” but was part of a growing trend towards regulatory intervention in crypto markets.
“The idea that policymakers will simply allow a decentralized virtual payments system to emerge without any regulatory oversight is fantastic, and if the use of crypto-assets becomes widespread, we can expect regulation to emerge. reinforced follow, ”he said.
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