A Regulatory Reckoning for Binance? | David Z. Morris - CoinDesk


CoinDesk 28 June, 2021 - 02:15pm 20 views

Is Binance banned in UK?

Binance, one of the world's leading cryptocurrency exchanges, has been banned from operating in the UK. Cayman Islands-based Binance allows people to buy and sell a wide range of digital assets. The IndependentBinance banned in the UK: what does it mean for cryptocurrency traders and prices?

Why is Binance being banned?

The FCA banned cryptocurrency derivatives trading (which is offered by Binance) at the start of this year. It is concerned that cryptocurrencies are highly volatile and that derivatives trading (which allows investors to borrow to leverage the amount they invest) is too risky for retail investors. Motley FoolWhy Was Binance Banned in the U.K.?

The biggest crypto exchanges have grown by working around national regulators. Regulators are starting to take notice.

This weekend saw a cluster of enforcement actions or related impacts against Binance, the world’s largest cryptocurrency retail exchange. They may be a preview of bigger trouble for Binance and other exchanges that have spent years testing the boundaries of financial regulation worldwide.

The first drumbeat came on Friday, when Japan’s Financial Services Authority warned Binance it was providing financial services to Japanese citizens without proper registration. On Saturday, the U.K.’s Financial Conduct Authority issued a similar warning against Binance Markets Ltd., an entity through which Binance has tried to offer regulated U.K. services. Then on Sunday, Binance announced that it would stop offering services in Ontario after the Canadian province issued warnings or actions against the exchanges Bybit, KuCoin and Poloniex.

David Z. Morris is CoinDesk's chief insights columnist.

Like Binance, those broadly fall into a class of “global” crypto exchanges that are widely used in jurisdictions where they are not explicitly licensed to operate. The series of actions this past weekend could be a preview of a sterner worldwide clampdown on that class of crypto exchanges.

Exchanges like KuCoin and Bitfinex have based much of their growth on what’s known as “regulatory arbitrage.” The term refers to the exploitation of differences between laws in different places to evade oversight and control. It can also refer more simply to the exploitation of unclear or weakly enforced regulation. 

Uber’s growth was a mainstream example of regulatory arbitrage. In the early to mid-2010s, the ride-hailing giant used technical and legal subterfuge to expand into jurisdictions that had explicitly prohibited its operations, such as Austin, Texas. From such violations grew a $95 billion public company.

In the case of the exchanges, regulatory arbitrage has mainly involved putting headquarters in low-regulation jurisdictions while offering services in restricted countries via the superficial digital wink-and-nod of virtual private network (VPN) software. They also benefited from a period of disinterest from regulators in the developed world that lasted well into 2018. Exchanges that only dealt with crypto and didn’t offer fiat on-ramps, like BitMEX and for a time Binance itself, seemed particularly invisible to regulators.

Though they were nominally barred by law from serving customers in places like the U.S., Binance and others were known to routinely do so anyway. American customers who wanted to buy degen leveraged longs on BitMEX only needed to install VPN software to pretend they were located in, let’s say, Morocco. Exchanges have generally responded to regulator complaints about such activity in full kabuki mode, claiming that their geofencing means they’re not serving customers they’re not supposed to, and simply ignoring clear evidence of the workaround.

This basic situation has persisted even as regulatory scrutiny of global exchanges increased over the course of the recent bull market. Because financial regulation or enforcement are lax in many countries, particularly developing countries, exchanges remain free to facilitate crypto sales or trades to those residents – or anyone who pretends to be one via a VPN. Risks are lowered further if you put your corporate headquarters in a jurisdiction known for taking a lighter regulatory touch. Examples include the Seychelles, the longtime nominal headquarters of BitMEX, and Malta, where Binance’s central headquarters is ostensibly based. Those headquarters are largely for legal purposes: Binance’s operations, for instance, appear to be spread across a nebulous system of offices, itself a bulwark against enforcement.

A spokesman for the U.K.’s financial regulator clarified to Decrypt that the latest ban only formally affects the U.K. subsidiary Binance Markets Ltd., not Binance as a whole. But Binance Markets Ltd. doesn’t currently appear to have any operational services, in the U.K. or anywhere else. Instead, the FCA says Binance Group is still servicing U.K. traders through Binance.com, without any license to do so. 

The FCA told Decrypt that “U.K. consumers can continue to interact” with Binance services that don’t break U.K. rules, in essence leaving Binance, as it has been, responsible for screening. But that should not be read as a go-ahead for Binance to operate with impunity. The leveraged crypto trading that attracts many users to Binance is definitely illegal in the U.K., and with regulators clearly paying attention, they seem likely to pursue further restrictions and penalties.

As part of its plan to set up regulated U.K. trading, Binance purchased a regulated U.K. entity in 2020. The parent company clearly expected that this would be an easy path to setting up above-board U.K. operations, which it said at the time would be operational by summer 2020. But Binance U.K. never got its regulatory go-ahead, and the new statements appear aimed less at curtailing back-door trading than sending a strong signal that British authorities aren’t eager to let Binance in through the front.

These are all major blows to Binance’s world-straddling ambitions, but more importantly, they signal a continued crackdown on crypto’s biggest scofflaws. This arguably began with the U.S. filing criminal money laundering charges against Arthur Hayes and other executives of BitMEX. While uncertainty, indifference and VPNs have allowed global exchanges to play games with regulators for years, leaders looking at those sorts of personal consequences may finally start to take regulators seriously.

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XRP Whales, Binance Ban, ZA Crypto Block, New FX Licences: Editor’s Pick

Finance Magnates 29 June, 2021 - 03:00pm

At the start of a disastrous weekend for crypto exchange giant Binance, Finance Magnates reported on a recent transfer of XRP worth approximately $18 million from Binance to a digital wallet.

An XRP account moved 26 million coins from Binance to an unknown crypto wallet on Thursday 24th June at 17:00.

Read more on the XRP whale here.

Friday got worse for Binance.  Japan’s top financial market regulator, the Financial Services Agency (FSA), issued a warning against Binance as the cryptocurrency exchange continues to offer services in the country without authorization.

The warning issued on Friday said that Binance has been providing crypto exchange services in the country without registering with the FSA.

Read more on the Japanese FSA Binance Warning here.

The final part of the weekend Binance trilogy of bad news was the FCA banning the Binance Group from the UK. The FCA said:

“Binance Markets Limited is not permitted to undertake any regulated activity in the UK. This firm is part of a wider Group (Binance Group).”

“Due to the imposition of requirements by the FCA, Binance Markets Limited is not currently permitted to undertake any regulated activities without the prior written consent of the FCA.”

Read more on the Binance UK ban here.

As Finance Magnates reported on Wednesday, South African banks are blocking transactions of their clients who are opting to purchase cryptocurrencies on international exchanges.

Read more on the South Africa Bank block on crypto here.

AETOS Capital Group Holdings Limited, an FX and CFDs trading services provider, has gained a new regulatory business license from the Cayman Islands Monetary Authority.

AETOS already holds operational licenses from regulators in the United Kingdom, Australia and Vanuatu.

Read more on the AETOS Cayman Islands Licence here.

Fxview, a Cyprus-based financial services provider, announced today that it has established an offshore subsidiary in Saint Vincent and Grenadines to expand the company’s operations.

Earlier this month, Finvasia Group, the owner of different brands in fintech and financial services, announced the acquisition of a 100% stake in Fxview for an undisclosed amount.

Read more on the FXview Saint Vincent and Grenadines subsidiary here

Detectives from the UK Metropolitan Police’s Economic Crime Command conducted the largest cryptocurrency seizure in the country, and it is believed to be one of the largest globally.

According to the announcement, the authorities seized £114 million ($158.8 million) worth in virtual currencies on Wednesday, reportedly related to a money laundering case.

Read more on the crypto seizure here.

South Africa is looking at the country’s biggest cryptocurrency fraud as the two Africrypt Founders, Raees and Ameer Cajee, disappeared with Bitcoins worth $3.6 billion belonging to the investors of the fund.

Ameer Cajee, the Chief Operating Officer of Africrypt, wrote to the investors informing them that the investment platform has been hacked which forced them to halt operations.

Read more on the Africrypt Fraud here.

Britain bans Binance's UK ops in latest cryptocurrency crackdown

Yahoo Finance UK 29 June, 2021 - 03:00pm

June 27 (Reuters) - Britain's financial regulator has said Binance, one of the world's largest cryptocurrency exchanges, cannot conduct any regulated activity and issued a warning to consumers about the platform, which is coming under growing scrutiny globally.

In a notice dated June 25, the Financial Conduct Authority (FCA) said Binance Markets Ltd, Binance's only regulated UK entity, "must not, without the prior written consent of the FCA, carry out any regulated activities... with immediate effect".

It also issued a warning to consumers about Binance Markets and the wider Binance group.

Binance said in a statement that Binance Markets, which it acquired in 2020, was not yet using its regulatory permissions, and that the FCA's move would not impact services offered on its Binance.com website.

"We take a collaborative approach in working with regulators and we take our compliance obligations very seriously. We are actively keeping abreast of changing policies, rules and laws in this new space," a spokesperson said.

Binance announced in June last year that it had bought an FCA-regulated entity and would use it to offer cryptocurrency trading services using pounds and euros.

While trading of cryptocurrencies is not directly regulated in Britain, offering services such as trading in cryptocurrency derivatives does require authorisation.

The FCA has told Binance that by June 30 it must display a notice stating "BINANCE MARKETS LIMITED IS NOT PERMITTED TO UNDERTAKE ANY REGULATED ACTIVITY IN THE UK" on its website and social media channels.

It must also secure and preserve all records relating to UK consumers and inform the FCA this has been done by July 2.

The regulator did not explain why it had taken these measures.

British citizens will still be able to access Binance's services in other jurisdictions.

The FCA is stepping up its oversight of cryptocurrency trading, which has soared in popularity in Britain along with other countries around the globe.

Since January, the FCA has required all firms offering cryptocurrency-related services to register and show they comply with anti-money laundering rules. However earlier this month it said that just five firms had registered, and that the majority were not yet compliant. read more

Japan's regulator said on June 25 that Binance was operating in the country illegally, a notice posted on Japan's Financial Services Agency website showed.

Last month, Bloomberg reported that officials from the U.S. Justice Department and Internal Revenue Service who probe money laundering and tax offences had sought information from individuals with insight into Binance's business. read more

In April, Germany's financial regulator BaFin said the exchange risked being fined for offering digital tokens without an investor prospectus. read more

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U.K. Financial Regulator Bars Crypto Exchange Binance

Bloomberg Markets and Finance 29 June, 2021 - 03:00pm

UK bans Binance's Britain operations | ANC

ANC 24/7 29 June, 2021 - 03:00pm

More Regulatory Clarity Is Good for Crypto: Bitwise CIO

Bloomberg Technology 29 June, 2021 - 03:00pm

Bitcoin, ethereum rise as regulatory action seen as signals of market 'maturing'

Yahoo News 29 June, 2021 - 03:00pm

Bitcoin (BTC-USD) was up 1.6%, trading at $35,249 ($25,433). Despite recovering from a sell off in which its price fell to below $30,000, it still remains far away from its all-time high of $63,000 from earlier in the year.

Ethereum (ETH-USD), the world’s second largest cryptocurrency, was up 8%, trading at $2,158.

Cryptos had slumped amid news of regulatory crackdown in China, but since then they have been rising steadily higher. They remain unfazed by news that Britain’s financial watchdog issued a warning to consumers that one of the world’s largest bitcoin exchanges is not permitted to undertake regulated activities in the UK.

Over the weekend the Financial Conduct Authority (FCA) ordered Binance Markets to remove all advertising and financial promotions by 30 June.

The FT reported that Binance customers are now not able to withdraw or deposit pounds using Faster Payments, one of the main UK payments systems. Binance said on its website the platform was suspended for maintenance

"The lack of access to Faster Payments represented a significant curb on UK clients’ abilities to move money from the exchange directly into their bank accounts," FT reported. 

Read more: Why the UK banned Binance and what it means for your crypto assets

Mati Greenspan, CEO of Quantum Economics, clarified that Binance has not been banned from the UK, and the company is still free to offer spot crypto trading in the country.

He said Britons are still free to buy, sell, and hold crypto on the platform but the FCA has issued an enforcement action against Binance for offering complex products where they shouldn't have.

“Investors see the crackdown as a sign that the crypto markets are maturing, and that the company will have to accelerate its process of becoming a regulated exchange, which will likely lead to increased trust among crypto traders,” said Naeem Aslam, chief market analyst at Ava Trade.

He also pointed out that despite tighter controls imposed by global financial regulators, crypto investments in India, the world's largest democracy grew from $200m to nearly $40bn in a year. 

"Currently, 15 million people in India trade digital currencies, and the rise in investments demonstrates bitcoin's potential to reach new heights."

Meanwhile Greenspan also pointed out that due to the mining crackdown in China, bitcoin's hash rate is now at its lowest level in two years. The hash rate is a measuring unit of the processing power of the bitcoin network.

"There's still more than enough hash power to keep the network safe and secure, and there's no reason to think that any of this will have a significant impact on market pricing," he said. 

But he added that anyone sending bitcoin across the network should be prepared to wait longer than usual.

Wall Street investment bank Morgan Stanley holds a substantial sum of Bitcoin-related assets according to a filing with the U.S. SEC.

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LONDON (Reuters) -A growing number of crypto asset firms are abandoning attempts to register with Britain's financial regulator as global scrutiny of the rapidly-growing sector intensifies. The Financial Conduct Authority (FCA) banned Binance, one of the world's biggest crypto exchanges, on Friday from conducting any regulated activity in Britain as regulators across the world bolster oversight of the crypto sector. Data on registrations shows the number which have been ditched has jumped by a quarter in less than a month, an FCA spokesperson said on Monday, adding that Binance withdrew its application in mid-May, without giving further details.

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"Binance can no longer continue to service Ontario-based users," the exchange said Friday.

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Over the weekend the Financial Conduct Authority (FCA) ordered Binance Markets to remove all advertising and financial promotions by 30 June.

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NatWest Group Imposes Limits on Transfers to Crypto Exchanges | Finance Magnates

Finance Magnates 29 June, 2021 - 01:09pm

According to Reuters, citing a spokesperson from the holding company, the cap was imposed on June 24, and it targets several cryptocurrency exchanges. However, the firm didn’t elaborate on which specific companies were included in the limits set.

“We have seen a high level of cryptocurrency investment scams targeting our customers across retail and business banking, particularly through social media sites. To protect our customers from the criminals exploiting these platforms, we’re temporarily reducing the maximum daily amount that a customer can send to cryptocurrency exchanges as well as blocking payments to a small number of cryptocurrency asset firms where we have seen particularly significant levels of fraud-related harm for our customers,” the spokesperson commented, who added that the amount varies on each crypto exchange, which could range in the thousands of pounds.

Binance hasn’t issued an official comment about the matter as of press time nor answered press inquiries. Over the weekend, the British financial watchdog prohibited the major digital asset exchange from operating in the United Kingdom. “Binance Markets Limited is not permitted to undertake any regulated activity in the UK. This firm is part of a wider Group (Binance Group). Due to the imposition of requirements by the FCA, Binance Markets Limited is not currently permitted to undertake any regulated activities without the prior written consent of the FCA,” the authority said at that time.

Still, Binance – founded by Changpeng Zhao (CZ) – has argued in the past that they’ve been working closely with regulators and industry leaders to strengthen its protection policies towards users further.

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