Monday, July 26, 2021

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U.K. regulator cracks down on Binance, the worlds biggest cryptocurrency exchange


A top financial regulator in Britain has ordered Binance, the worlds biggest cryptocurrency exchange, to cease regulated activity in the country, the latest effort by a world government to limit crypto-related businesses.

The Financial Conduct Authority followed its prohibitions on Binance Markets Limited with a warning to consumers to be wary of advertisements "promising high returns on investments in cryptoasset or cryptoasset-related products." The move mirrors that of Japan, where finance regulators last week notified Binance that it is not authorized to do business in the country.

The regulatory warning shots highlights the inherent tension surrounding digital currency, which is finding cachet with a growing number of new investors and even has it encounters skepticism from governments and legacy financial institutions due to its volatility and its use by malicious actors to facilitate crime.

The crypto market's extreme volatility was on display last week, as hundreds of billions of dollars in value evaporated on news of China's crackdown on bitcoin mining. But as of Monday afternoon, bitcoin was trading up 5%, around $34,0000, and the total cryptocurrency market stood at $1.4 trillion, according to CoinMarketCap.

Consumers in the U.K. will still be able to use Binance for activities the FCA doesn't regulate, such as buying and selling bitcoin. In an email to The Post, Binance said the FCA notice has "no direct impact" on the services provided on Binance.com

"We are aware of recent reports about an FCA UK notice in relation to Binance Markets Limited (BML). BML is a separate legal entity and does not offer any products or services via the Binance.com website," Binance said in an email to The Post. "Binance acquired BML May 2020 and has not yet launched its UK business or used its FCA regulatory permissions. Our relationship with our users has not changed."

The FCA has previously cautioned that scores of crypto companies that were seeking its approval could not meet requirements for preventing money laundering. The British financial watchdog named price volatility, consumer protection among its chief concerns about the cryptocurrency landscape, as well as charges and fees and misleading marketing materials.

"Investing in cryptoassets, or investments and lending linked to them, generally involves taking very high risks with investors' money," the FCA said in January. "If consumers invest in these types of product, they should be prepared to lose all their money."

Binance, which according to its website hosts 2 billion trades a day, applied to register with the FCA but withdrew its application on May 17, the Wall Street Journal reported.

Just five crypto companies are currently registered with the FCA, including Gemini and Ziglu Limited, a British digital wallet company. The FCA recommends consumer withdraw their investments in unregistered assets or firms, as they are "operating illegally."

Global adoption and investment in cryptocurrency isare rising just as some regulators are setting limitations and cracking down on crypto-related businesses. Others are grappling with how to design new rules to protect investors without stifling the potential for financial innovation.

In the U.S., the chair of the Securities and Exchange Commission has called for a federal watchdog to oversee crypto exchanges - the platforms where people can buy and sell tokens - since no single market regulator has clear jurisdiction over them. "Right now the exchanges trading in these crypto assets do not have a regulatory framework, either at the SEC or our sister agency, the Commodity Futures Trading Commission," SEC Chair Gary Gensler told Congress last month.

More recently, Biden administration officials have embarked on a review of potential oversight measures tied to the speculative trading of the crypto market and cryptocurrency's potential uses to facilitate crime. Tax avoidance is another key issue that policymakers are focused on. The White House and the Treasury Department are backing a new plan to target cryptocurrency as part of a broader effort to ensure tax compliance.

While cryptocurrency investors in the U.S. can trade tokens and exchange them for cash, achieving some degree of mainstream adoption, investment vehicles offered through other types of assets are not yet widely available for digital currency. Some investment managers are seeking regulatory approval for bitcoin exchange traded funds, in an attempt to pull in additional investors similar to the way ETFs have broadened the appeal of investing in the stock market. Other financial services companies are seeking to place crypto alongside the basket of investments that comprise retirement plans.

Published : June 29, 2021

By : The Washington Post · Taylor Telford