The Financial Conduct Authority (FCA), the UK’s financial services watchdog, has issued a damning report of the UK-based division of the Binance cryptocurrency exchange. The international exchange, on which users can buy, sell and hold a wide range of 316 cryptocurrencies and other digital tokens and assets including bitcoin and ether, has 13.5 million customers worldwide and claims it processes 1.4 million transactions every second.
The FCA’s main concern is Binance’s anti-money laundering standards which the watchdog first started to crack down on in June. However, the report was most scathing about the UK division Binance Markets’s attitude to attempts to engage with it. The FCA concluded the opaque company structure and unwillingness to respond to questions means the cryptocurrency exchange’s operations in the country are “not capable of being effectively supervised”.
In June, the regulator obliged Binance to warn its UK-based customers it is not authorised to carry out in regulated financial services in the UK. New anti-money laundering checks were introduced after the FCA’s initial probe with account holders obliged to provide a form of identification such as a passport, ID card or driving license. But the 2017-founded exchange has been, says the report, uncooperative when asked to respond to “basic questions”.
Binance Markets did not offer any details on how the wider Binance group is structured nor provide information on the legal entity which owns the exchange’s binance.com website. It also didn’t explain how UK-based customers can buy its products. The report’s publication was delayed to give Binance the right to reply, which it would seem the company also did not respond to.
British users can still trade cryptocurrencies and other digital assets on binance.com because cryptocurrencies are not regulated in the UK. But other regulated financial services providers such as banks are now blocking their customers from engaging in financial transactions with the exchange. Barclays has been confirmed as doing so.
Binance founder Changpeng Zhao, a Chinese-Canadian software engineer says his business is one without a headquarters. The holding company behind the exchange is registered in the Cayman Islands.
Regulators around the world have, like the FCA, struggled to first fully understand and then get to grips with the cryptocurrency industry, which is almost entirely digital and whose main actors often prefer to do everything in their power to remain out of the reach of national regulators and lawmakers. However, if cryptocurrencies are to move into mainstream finance there is a general acceptance that compromises with regulators will have to be made.
The FCA concluded:
“The FCA considers that the firm’s responses to some questions amounted to a refusal to supply information and that the firm has failed to respond adequately to the FCA’s information requirements”.
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