Binance, a popular international cryptocurrency exchange, has been barred from operating in the United Kingdom by the country’s authorities.
In a recent statement, the Financial Conduct Authority (FCA) — the UK’s financial regulator said: “Binance Markets Limited is not permitted to undertake any regulated activity in the U.K.”
Binance will be required to provide a clear warning to customers in the United Kingdom on its website. In addition, it is prohibited from advertising its services in the United Kingdom.
Binance Markets Limited is a subsidiary of the Binance Group, which is based in the Cayman Islands and operates in the United Kingdom.
At this time, the Financial Conduct Authority (FCA) does not regulate cryptocurrency exchanges that operate in the United Kingdom. As a result, a spokesperson for the Binance Group stated that traders in the United Kingdom would be able to conduct business as usual. Because the website is not based in the United Kingdom, the company claims that the exchange’s services would not be affected.
Deposits and withdrawals in British Pounds (GBP) are currently unavailable on the site due to a technical issue. This could be due to the fact that payment processors fall under the jurisdiction of the Financial Conduct Authority, but the situation is not yet clear.
What is the reason for the United Kingdom’s crackdown on Binance?
Binance is a cryptocurrency exchange that ranks among the largest in the world. However, it has recently come into conflict with regulators in a number of countries because it is pushing the boundaries of the cryptocurrency services it provides.
Regulators in Japan issued a warning earlier this month, stating that the company is not authorized to conduct business in the country. Binance has also pulled out of the province of Ontario in Canada, following regulatory actions against other cryptocurrency exchanges.
Binance established a subsidiary in the United Kingdom as part of its efforts to become the first cryptocurrency exchange to be licensed in the country. In order to create something similar to Binance, the team brainstormed ideas. A country-specific website that adheres to local regulations in the United States, on the other hand, withdrew its application at the beginning of this year.
The FCA is concerned about a number of issues:
- The inability to exert control over cryptocurrency trading. If you invest in cryptocurrency, the Financial Conduct Authority (FCA) has issued several warnings, including one that investors could “lose all of their money.” It is concerned about the high levels of volatility in the cryptocurrency market and believes that cryptocurrency exchanges are not transparent about the risks involved.
- Regulations pertaining to anti-money laundering (AML). Cryptocurrency businesses in the United Kingdom have until the end of next month to register with the Financial Conduct Authority and comply with anti-money laundering regulations. Because of the large number of applications received, the original January deadline had to be extended.
- Cryptocurrency derivatives The Financial Conduct Authority (FCA) banned cryptocurrency derivatives trading (which is provided by Binance) at the beginning of this year. Because cryptocurrencies are highly volatile, the SEC is concerned about the risk associated with derivatives trading (which allows investors to borrow in order to leverage the amount of money they invest).
- Recent stock tokens issued by Binance. In April, Binance launched a new product called stock tokens, which are cryptocurrencies that are tied to the value of specific stocks, such as Apple or Microsoft, according to the company. This causes a blurring of the lines between cryptocurrency tokens and company stocks, and it has raised regulatory concerns in a number of jurisdictions.
What does this mean for the future of cryptocurrencies around the world?
The news that China would crack down on all cryptocurrency services in the country earlier this year caused cryptocurrency prices to plummet by a significant amount. Another set of countries, including the United Kingdom and the United States, is debating how cryptocurrency trading should be regulated.
Some cryptocurrency exchanges have chosen to play it safe and take pride in operating within the confines of the regulatory framework. Many others, such as Binance, continue to take the approach of acting first and asking for forgiveness later.
Retail investors should be afforded the same levels of protection as they receive when investing in stocks or opening a bank account, according to regulators. Despite the fact that governments want to protect their economies and currencies, they are having difficulty answering the question, “What is a cryptocurrency?”
Some cryptocurrencies have characteristics that are similar to stocks. Others are simple currencies that are used in everyday life. Others are venturing into lending and other forms of decentralized finance to expand their reach (Defi). This creates a significant headache for law enforcement officials who are trying to prevent money laundering and scams.
Many countries are wary of over regimenting this rapidly expanding market because it is so new. A number of governments are also considering the advantages of launching their own govcoins, such as a digital dollar, to raise funds. These would incorporate the blockchain technology that underpins the majority of digital currencies, but with the government backing and lack of volatility that we see in traditional currencies today.
As one cryptocurrency CEO predicted, increased regulation will undoubtedly be implemented in the coming months and years. This could benefit the cryptocurrency industry by weeding out some of the bad actors and boosting consumer confidence at the same time. However, as we have seen in China, it has the potential to harm the entire industry.
