Financial Conduct Authority Issues Warning to Cryptocurrency Exchange

The UK’s financial regulator has issued a warning to Binance, the world’s biggest cryptocurrency exchange, that it cannot conduct any ‘regulated activity’ in the UK; it also advised people to be wary of adverts promising high returns on cryptoasset investments – writes Christian Leeming.

Binance is not based in the UK so it will not impact residents who use the website to purchase and sell cryptocurrencies; the company said the FCA notice would have no ‘direct impact’ on the services it provides via website Binance.com.

Previously based in Malta, Binance Group is currently based in the Cayman Islands; owned by Binance Group, Binance Markets Limited, an affiliate firm based in London, is not permitted to undertake any regulated activity without written consent of the FCA and has until Wednesday to comply with the ruling

FCA does not regulate cryptocurrencies, but requires exchanges to register with them – Binance has not done so and therefore is not allowed to operate an exchange in the UK.

Binance.com is a centralised exchange that offers a range of online financial products and services, including trading a wide range of digital currencies, digital wallets, futures, securities, savings accounts and lending.

Although the FCA move to bar Binance from operating in the UK may have little impact on the day to day running of its Cayman-based exchange, it sends a strong signal that it is worried about the dangers of investing in cyptocurrencies, and wants consumers to beware.

FCA has effectively forbidden Binance from setting up an exchange in the UK, which it fears could be used as a cover for illicit activity – the US Securities and Exchange Commission probed one of the firm’s entities in connection with tax offences and money laundering.

The company is also blocked from advertising and the way it holds customer records is under scrutiny.

The regulator cannot stop people from trading in cryptocurrencies, but this is as strong a message as can be sent; it is a warning to those wishing to trade digital currencies to ensure their chosen platform is registered.

The move comes as regulators around the world push back against cryptocurrency platforms; Binance recently announced it was pulling out of Ontario, Canada, after it, and several other crypto trading platforms failed to comply with provincial regulations and Japan’s Financial Services Agency warned it is operating in the country without permission.

In the fledgling, but rapidly growing world of cryptocurrencies there are fears that attempts to impose stricter regulation on companies such as Binance will cause users to move to less secure exchanges.

It is currently possible to use apps to buy cryptocurrencies in the UK, but the FCA regulates speculation on prices; it is not uncommon for such businesses to move their operations if local regulations become hostile.

Binance.US is currently one of the biggest digital currency exchanges in the US, and Binance is one of the biggest firms in the global fintech industry.

Nick Saponaro, a long-time cryptocurrency investor and entrepreneur, told the BBC ‘I do believe they are trying to comply with regulations, but often with these businesses it’s an ‘ask for forgiveness’ model, [where] they hope they can make enough money so if they do incur a fine, it’s negligible comparatively to what they’ve earned.’

Mr Saponaro, who co-founded the crypto-currency Divi says the real problem with cryptocurrency exchanges is that they remain centralised, in that there is still a central authority that takes custody of users’ money, almost like a bank, which is counter to what blockchain technologies were designed to do.

He stresses that digital currencies are ‘not a scam’ and that eventually the fintech industry will get there: ‘We’re 12 years into the crypto adoption cycle, these things just take time – the exact same things were said about the internet initially,’ he said.

‘Governments of each jurisdiction, especially the G7, need to with full transparency and confidence give us the full regulations about what we can and cannot do, and it needs to fit what the technology actually does.’

“Crypto Crash: How to Make Money in Crypto Bear Market? A Comprehensive Guide to Profitability”  >