In a move to increase scrutiny against cryptocurrency trading, UK’s Financial Conduct Authority (FCA) is banning Binance Market Limited, an affiliate of Chinese crypto giant Binance Group, from undertaking any regulated activity in the UK, citing the current situation that the company has not been permitted by the agency to conduct such activities, which requires a written consent of the FCA.
Details: In a statement published on June 25, FCA claimed that Binance Market is not permitted to undertake any regulated activity in the UK.
The FCA took issue with Binance’s advertising of crypto asset trading, specifically derivatives, such as futures contracts, contracts for difference and options, etc. The watchdog does not have a say in literal cryptocurrency trading, but does regulate these derivatives since they are considered “securities”. A company dealing in crypto derivatives trading would need to obtain from the FCA an authorization, which Binance Market currently has not.
“Most firms advertising and selling investments in cryptoassets are not authorised by the FCA,” warned the British agency, “This means that if you invest in certain cryptoassets you will not have access to the Financial Ombudsman Service or the Financial Services Compensation Scheme if things go wrong.”
Context: Binance Market, the entity in question, is related to another unknown FCA-regulated entity Binance claimed to have acquired last year. On June 17, 2020, the Chinese company claimed that trading services to UK retail and institutional investors would be provided by Binance.UK, operated by Binance Market.
In that June 2020 announcement, services provided by the British marketplace revolved around basic trading of cryptocurrencies, such as buying and selling, as well as exchanging fiat money for cryptocurrencies. Derivative product was not mentioned in the announcement.
The FCA began a registration process for companies providing crypto trading services, asking them to comply with anti-money laundering and terrorist financing regulations. However, the watchdog claimed that by the end of last month, only 5 companies complied.
It is likely that Binance would be one of the first batch of crypto trading companies that the FCA will be putting more scrutiny on.
Binance, one of the leading crypto trading companies around the world, isn’t particularly keen on following the rule and appearing innocent. For example, the company is known to be plagiarizing popular NFTs, a form of digitized art, to be auctioned on its own blockchain system.
Meanwhile, China is also stepping the brakes heavily on cryptocurrency, though the focus is on mining. The country is expected to shut down 90% of its bitcoin mining capacity. Various provinces, including Sichuan, one of the most prominent, recently banned bitcoin mining altogether, causing compute power to flee overseas.