More trouble for Binance as UK regulators ban the operation of the crypto exchange
More trouble for Binance as UK regulators ban the operation of the crypto exchange
The global cryptocurrency exchange has come under fire from UK regulators after the country's Financial Conduct Authority (FCA) issued a statement prohibiting it from rendering any regulated service in the country. According to the FCA's statement, "Binance Markets Limited is not permitted to engage in any regulated activity in the United Kingdom."
The apex regulator continued by stating that no other entity in the Binance Group is authorized, registered, or licensed to conduct regulated activity in the United Kingdom.
Binance, the world's largest cryptocurrency exchange, is an online platform for users to trade various cryptocurrencies. The company accepts Bitcoin and a number of other popular cryptocurrencies. As with other exchanges, it also offers a wallet service through which users can store and transact their funds.
Binance operates in approximately 180 countries, with offices in Nigeria, Mexico, Ghana, Burkina Faso, and Madagascar. However, as more people use cryptocurrencies and more heists are carried out with digital coins as the focal point; governments worldwide are uniting against digital currencies and companies that facilitate their use.
Adequate regulation of decentralized payments continues to be a point of contention between companies such as Binance and governments. Prior to the UK's ban on Binance, the company was reportedly in the process of applying to the FCA for a license to operate.
The process, however, stalled after Binance withdrew its application. The FCA confirmed that the application had been rescinded following what it described as "intense FCA engagement."
According to the regulator's statement, Binance did not comply with all of its requirements. This could include, but is not limited to, its anti-money laundering and anti-fraud measures.
As previously reported, Africrypt, a South African (SA) cryptocurrency investment firm, recently collapsed, with the founders reportedly fleeing with approximately 69,000 Bitcoins. At their peak in April, the coins were estimated to be worth around $4 billion. Mirror Trading International, another South African cryptocurrency firm, also went bankrupt in 2020. Investors lost 23,000 cryptocurrencies worth an estimated $1.2 billion.
In June 2021, Colonial Pipeline, the largest pipeline system in the United States for refined oil products, was held hostage by hackers who demanded a ransom of approximately 75 bitcoin (approximately $5 million at the time). The company compensated the extortionists in order to resume normal operations.
Only a few instances of cryptocurrency-related fraud and money laundering have been solved and the perpetrators apprehended. This has resulted in an increase in the number of governments banning cryptocurrencies within their jurisdictions or requiring crypto companies to adhere to a variety of different regulations and policies before being allowed to operate.
Binance has had previous regulatory scuffles
Japan had issued a warning to Binance a day before the UK ban, stating that the company is not licensed to provide cryptocurrency services in the country. This is the Financial Services Agency of Japan's second warning, the first being issued in 2018. It is unknown at the moment what measures the country is taking to regulate cryptocurrency exchanges.
Germany's Federal Financial Supervisory Authority, or BaFin, announced in April that it suspected Binance of violating the country's securities laws. The cryptocurrency exchange previously stated that it would offer stock tokens that would expose investors to Microsoft, Apple, and other illustrious companies' stocks. Germany, on the other hand, chastised the company for not publishing an investor prospectus for securities-tracking digital tokens.
The regulator clarified that the breach could result in a fine of 5 million euros ($6 million) or 3% of Binance's 2020 revenue.
“BaFin has reason to believe that Binance Germany is selling shares in Germany via'share tokens' without providing the required prospectuses,” it stated.
“A violation of the prospectus obligation is an administrative offense under 24 Paragraph 3 No. 1 WpPG and is punishable by a fine of up to 5 million euros or 3% of the previous financial year's total revenue under 24 Paragraph 6 WpPG. Additionally, fines of up to double the economic benefit derived from the violation may be imposed,” the statement clarified.
The UK has given Binance until Wednesday to cease operations in its territory. Although the exchange no longer has regulatory approval to operate in the UK, this does not preclude UK citizens from using its services while abroad.
With a slew of governments already raising concerns about Binance's global operations, other countries may follow suit by requiring the crypto company to obtain an operating license or shut down operations in their jurisdiction.
Nigeria is currently in talks with Twitter about registering its operations in the country and obtaining an operating license. Nigerian banks are prohibited from facilitating transactions with cryptocurrency exchanges, and the government has recently begun to tax foreign companies that generate significant revenue in Nigeria.
Despite the renewed focus on technology companies, the country does not have a robust regulatory framework for crypto companies. Rather than that, it has prohibited certain aspects of its operations. Requesting an operating license from Binance in Nigeria will imply that regulators recognize and accept the exchange's operations, which is a remote possibility given recent events. At least for the time being.
The ban, however, has not resulted in a drop in prices from last week, as Bitcoin is still trading around $34,000 at the time of writing.
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