Britain’s financial regulator has blacklisted one of the world’s biggest cryptocurrency marketplaces over its failure to meet money-laundering controls.
The Financial Conduct Authority told Binance at the weekend to stop regulated activities in the UK in one of the biggest clampdowns yet by the watchdog on the fast-growing industry.
Binance Markets Limited, the UK division of the cryptocurrency exchange, must withdraw all of its advertising by the close of business on Wednesday. The firm was also ordered to post a prominent notice on its website warning consumers that it is barred from conducting regulated business.
It is a blow to Binance, which claims on its website to facilitate more than 1.4 million transactions per second.
The group was founded four years ago by Changpeng Zhao, a Chinese-Canadian software developer nicknamed CZ , who is estimated by Forbes to have amassed a fortune worth $1.9 billion from the cryptocurrency industry. Its holding company is registered to the Cayman Islands.
Cryptocurrencies such as bitcoin exist only as computer code and are mostly unregulated in Britain. The FCA has previously warned consumers that they risk losing all of their money if they trade digital assets.
Binance is facing growing scrutiny from regulators around the world. Last week, the Japanese regulator warned that it was operating there without authorisation, while the Indian authorities said this month that they were investigating transactions by a subsidiary of the group. The firm is also said to be under investigation in the United States and has faced pressure from regulators in Germany.
Last year, the FCA became the anti-money-laundering and counterterrorism financing supervisor of cryptocurrency businesses, which are now required to apply to register with the watchdog. The regulator warned this month that many firms were falling short of its standards and were being forced to scrap their applications and stop trading.
A spokesman for the watchdog said yesterday that Binance had pulled its application on May 17 “following intensive engagement from the FCA”. He added that the action it had taken against Binance Markets had “been in train for some time”.
The regulator has posted a public warning to consumers on its website about Binance Markets and the Binance Group, in which it cautioned that no other entity within the group is authorised in the UK.
A Binance spokesman claimed that the FCA’s clampdown would have no practical impact on its ability to offer services to UK customers because Binance Markets Limited is “a separate legal entity” to the Binance.com website.
“The FCA notice has no direct impact on the services provided on Binance.com. Our relationship with our users has not changed,” he said. “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.”
The FCA’s restrictions alarmed crypto-traders, some of whom used social media yesterday to seek clarity from the exchange. “What happens to our crypto?!” one Twitter user asked Binance’s official account on the website. Another said: “We don’t need to close our Binance account do we?”
The regulator’s ban does not stop people in Britain from using services offered by Binance entities overseas, although The Times understands that the authority is looking closely at how the wider Binance group interacts with UK consumers. It will prevent Binance Markets from offering services in traditional foreign exchange, however.
The FCA crackdown came a week after an investigation by The Times showed that it was possible to sign up to a Binance account using a fake name, address and postcode and then buy cryptocurrency with different bank details. One bank, TSB, has become so alarmed by the number of its savers losing money to fraudsters with Binance accounts that it was preparing to take matters into its own hands and block all of its 5.4 million customers from using cryptocurrency trading platforms.
New figures from Pinsent Masons, the law and professional services firm, showed that reports of cryptocurrency investment fraud in the UK to Action Fraud, the national hotline, jumped to 7,014 in the 12 months to the end of March, from 3,608 a year earlier.