Binance has landed on the wrong side of regulators in the UK as the country’s Financial Conduct Authority (FCA) issued a statement barring the global crypto exchange from rendering any regulated service in the UK. The FCA’s statement reads in part, “Binance Markets Limited is not permitted to undertake any regulated activity in the UK.”
The apex regulator went on to clarify that no other entity in the Binance Group has any form of UK authorisation, registration or licence to conduct a regulated activity within its jurisdiction.
The largest cryptocurrency exchange in the world, Binance is an online exchange where users can trade different cryptocurrencies. The company supports Bitcoin and many of the most commonly traded cryptocurrencies. Like other exchanges, it also provides a wallet service for its users to store and transact from.
Binance has a presence in about 180 countries including Nigeria, Mexico, Ghana, Burkina Faso and Madagascar. However, as more people use cryptocurrencies and more heists are being carried out with digital coins at the centre, governments across the world are closing ranks against digital currencies and companies that facilitate their use.
Ensuring adequate regulation for decentralized payments remains a source of conflict between companies like Binance and governments. Before the ban on Binance by the UK, the company had reportedly started an application process with the FCA to obtain a license for its operations.
However, the process fell through after Binance withdrew its application. The FCA confirmed that the application was rescinded following what it called “intensive engagement from the FCA.”
The regulator’s statement implies that Binance did not meet all its requirements. This could particularly concern its measures of preventing money laundering and fraud.
Recall that Africrypt, a South African (SA) cryptocurrency investment firm recently collapsed, with the founders reportedly making away with about 69,000 Bitcoins. The coins are estimated to be worth around $4 billion at their peak in April. In 2020, another South African crypto firm, Mirror Trading International also collapsed. Investors lost 23,000 digital coins with an estimated worth of $1.2 billion.
Back in June 2021, Colonial Pipeline, the largest pipeline system for refined oil products in the U.S, had some of its critical files held hostage by hackers who demanded a ransom of roughly 75 bitcoin (about $5 million at the time). The company paid the extortionists before they could continue with business as usual.
Only a few cases of fraud and money laundering involving cryptocurrencies have been solved and the perpetrators caught. This has resulted in more governments either banning cryptocurrencies within their jurisdiction or demanding that crypto companies meet up to different standards of regulations and policies before they can be allowed to operate.
Binance has had previous regulatory scuffles
A day before the UK ban, Japan had issued a warning to Binance saying that the company is not licensed to render cryptocurrency services in the country. This is the second warning from Japan’s Financial Services Agency with the first one being in 2018. It is not yet unknown what measures the country is taking to check the crypto exchange.
In April, Germany’s Federal Financial Supervisory Authority, or BaFin, said that it suspected Binance of violating its securities laws. The crypto exchange had said it would offer stock tokens that would expose investors to stocks of Microsoft, Apple and other illustrious companies. However, Germany faulted the company for offering securities-tracking digital tokens without publishing an investor prospectus.
The regulator clarified that the negligence could lead to Binance being fined 5 million euros ($6 million) or 3% of its 2020 turnover.
“BaFin has grounds to suspect that Binance Germany is selling shares in Germany in the form of ‘share tokens’ without offering the necessary prospectuses,” it said.
“A violation of the prospectus obligation constitutes an administrative offence according to § 24 Paragraph 3 No. 1 WpPG and can be punished with a fine of up to 5 million euros or 3 per cent of the total turnover of the last financial year according to § 24 Paragraph 6 WpPG. Fines of up to twice the economic benefit derived from the violation can also be imposed,” it clarified.
The UK has given Binance till Wednesday to wrap up its activities in its domain. Although the exchange no longer has regulatory approval to operate in the UK, this does not stop UK citizens from accessing its services if they are in another jurisdiction.
With the lineup of governments who have already raised eyebrows at Binance’s operations globally, other countries may follow suit with demands for the crypto company to obtain an operating license or close shop in their domain.
Nigeria is currently undergoing discussions with Twitter in a bid to have the social media company register its operations in the country and get an operating license. Nigerian banks are banned from facilitating transactions with crypto exchanges and lately, the government is working on taxing foreign companies that make considerable revenue from Nigeria.
Despite the renewed attention on tech companies, the country does not have much in place for regulating crypto companies. Rather, it has banned certain parts of its operations. Requesting an operating license from Binance in Nigeria will imply that regulators recognize and accept the operations of the exchange and previous events present a slim chance of that. At least, for now.
The ban has, however, not led to a drop in prices from last week as Bitcoin continues to trade around $34,000 today as at the time of this article.
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