The UK’s financial watchdog has ordered Binance to stop all regulated activities in Britain and has imposed strict requirements in a severe crackdown on one of the world’s largest cryptocurrency exchanges.
The intervention of the Financial Conduct Authority in recent days is one of the most significant moves that any global regulator has made against Binance, a digital asset company with subsidiaries around the world. The exchange has until Wednesday evening to confirm that it has complied with the watchdog’s demands and removed its advertising.
The intervention is a sign of how regulators are taking the cryptocurrency industry back for concerns regarding its potential role in illicit activities such as money laundering and fraud, and over often weak consumer protection.
The FCA has also issued a consumer warning against Binance registered company in Cayman Islands and Binance Markets Limited, a London subsidiary that is controlled by executive director Changpeng Zhao and supervised by the British regulator.
“Binance Markets Limited is not permitted to conduct any regulated activity in the United Kingdom,” the FCA said, adding, “no other entity in the Binance Group has any form of authorization, registration or license in the United Kingdom to do regulated activity in the United Kingdom ”.
The group did not immediately respond to an FT request for comment, but has already stated that it “takes its compliance obligations very seriously and is committed to following the requirements of the local regulator where we operate.”
Binance Markets Limited is not approved in the FCA’s cryptocurrency registration regime, which is required for UK groups offering digital asset services.
The entity had applied to become a cryptocurrency company registered with the regulator, but withdrew the application last month according to two people who know the situation. The watchdog confirmed that the application has been abandoned “following an intensive engagement by the FCA.”
The FCA’s attention in deciding whether or not to approve such applications is based on a review of controls and practices to prevent money laundering and terrorist financing.
Binance is one of the leading operators in the fast-emerging crypto market, offering one wide range of services to customers around the world, including trading in dozens of digital currencies, futures, options, stock tokens, as well as savings accounts and loans. It recorded crypto trading volumes equivalent to $ 1.5 tn last month, according to data from TheBlockCrypto.
As part of the FCA’s action, the regulator ordered Binance to post next Wednesday on its website that, “BINANCE MARKETS LIMITED is not allowed to undertake any regulated activity in the UK”. Binance Markets Limited must also “secure and preserve all records and / or information … relating to all UK consumers from its systems” and stop all advertising and financial promotion.
Binance Markets Limited was set up a year ago as part of a plan by the wider group to launch a UK-focused exchange, Binance UK, which would have been “ringed” by the wider global operation, according to the public documents and the two people familiar with the matter. Although the FCA has limited Binance to offering services in the United Kingdom, British citizens can also access Binance’s services in other jurisdictions.
Binance Markets Limited, based in London, has been allowed by the FCA to provide consumers with investment services in traditional currencies, something Binance has achieved by acquiring a financial company that was already registered with the regulator. The transaction was approved by the FCA last June, according to public documents.
The FCA’s decision comes after the Japan Financial Services Agency warned last week that Binance was doing unauthorized trading in cryptocurrencies with Japanese citizens. This is the second time the FSA has warned Binance after issuing an identical notice in 2018.
Germany’s financial watchdog has warned investors of April that Binance had probably violated security rules on its launch of trading in stock tokens, something the exchange tried unsuccessfully appeal against.
Additional reports from Robin Harding in Tokyo