The Financial Conduct Authority (FCA) has banned the world's largest cryptocurrency exchange firm Binance and has ruled the firm cannot conduct any regulated activity in the UK.
A consumer warning has been issued about Binance.com, advising people to be wary of advertisements promising high returns on crypto asset investments. The decision comes after regulators all over the world have started opposing crypto currency platforms.
The online centralised exchange known as Binance.com offers users a range of financial products and services including purchasing and trading in a wide range of digital currencies as well as digital wallets, futures, securities, savings accounts and even lending.
Binance Markets Limited (BML) is an affiliate firm based in London and Binance Group is currently based in the Cayman Islands.
BML owned by Binance Group have been informed by the FCA that it is not permitted to undertake any regulated activities until it has prior written consent, and it has until Wednesday to comply with the ruling.
The FCA also stressed that no part of the Binance Group holds any form of authorisation, registration or licence to conduct regulated activity in the UK.
Firms must be authorised by the FCA to advertise or sell such products in the UK, even whilst the FCA does not regulate crypto currencies, it does regulate crypto assets.
This will mean that people in the UK are not allowed to use Binance’s services to speculate or bet on whether the price of a crypto currency for example Bitcoin goes up or down.
A spokesperson for Binance told the BBC that the FCA notice has no direct impact on the services its provides from its Binance.com website and that BLA is a separate legal entity and does not offer any products or services through the Binance.com website. He also added that the firm’s relationship has not changed with its users and they will work with regulators and keep up to date with changing policies, rules, and laws.
In May 2020, The Binance Group acquired BML and has not yet used its FCA regulatory permissions or launched its UK business.
Binance have previously been scrutinised by regulators over its global operations.
According to Bloomberg, Binance Holdings in the US is one of the firm’s entities that has been the subject of a probe by the US Securities and Exchange Commission (SEC) specifically by its officials dealing with money laundering and tax offences. A similar warning was issued by SEC to US consumers about the platform back in April.
On Saturday, Binance pulled out of Ontario, Canada after the Ontario Securities Commission (OSC) accused it and several other crypto trading platforms of failing to comply with their regulations. In addition, Binance was warned by Japan’s Financial Services Agency (FSA) for the second time in 3 years for operating in the country without permission.
Binance offers a service with the ability to use your local currency to purchase digital currencies in the industry, this is known as 'flat on-ramp'. Binance’s US partner’s Silvergate Bank had already decided back in mid-June to stop processing US-dollar deposits and withdrawals for the firm.
The issue here in the UK is that the FCA does not regulate cryptocurrencies but it does regulate crypto assets. This means that that people can still use the Binance website to buy and sell cryptocurrencies as they are not regulated.
We would also add that it is not uncommon for crypto businesses to move to new jurisdictions if the regulations do not suit their needs. Binance has allegedly already moved several times.