- The UK regulator banned Binance from carrying out regulated activities.
- This is a warning to other crypto firms to tighten up compliance or risk missing out on surging consumer interest.
The UK’s Financial Conduct Authority (FCA) banned Binance from carrying out regulated activities in the country, per a press release that did not provide a further explanation for the ban.
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Zooming in on UK crypto regulations: Crypto trading is not directly regulated in the UK for now, so Binance can continue those operations. But market participants are required to have FCA authorization for derivatives like futures contracts and have until March 31, 2022, to comply with anti-money laundering (AML) requirements or face being shut down.
The FCA ruling is a blow to Binance’s UK operations that, when coupled with difficulties abroad, could significantly hinder Binance’s global user acquisition.
While users can still trade assets other than derivatives on Binance, they have no legal protection or recourse should something go wrong or if the exchange were to shut down. And now that Binance must display a notice on its exchange and social media accounts by June 30 stating that it’s not permitted to undertake regulated activities in the UK, some users will likely be deterred from using the platform.
Over the weekend, Binance was also forced to draw down operations in Ontario by year’s end and received a warning in Japan for failing to register with the country’s regulator—which could spell further bans in more countries down the line.
The FCA’s crackdown is a sign crypto firms need to tighten up compliance or risk putting off new users in the rapidly growing market.
2.3 million UK adults now hold crypto assets, up from 1.9 million last year. Attracting new users comes down to their reputation as legitimate platforms, as the space has to deal with a lack of regulatory oversight and headlines regularly linking cryptos with criminal activity: Just last week, UK authorities seized £114 million ($146.2 million) in cryptocurrencies used for money laundering.
New adopters will likely flock to more regulated platforms where they can feel safer experimenting with the new asset class, leaving those caught in regulatory crosshairs like Binance behind. Coinbase and Gemini, for example, are two of the most popular platforms for buying cryptos in the US and UK. Coinbase has enjoyed heightened legitimacy since listing on the Nasdaq, and Gemini is one of just five crypto market players registered under the FCA’s AML regime.
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