The FCA sends a warning to Binance Markets Limited

The Financial Conduct Authority (FCA) has clamped down on Binance Markets Limited and preventing the firm from undertaking any regulated activity in the UK, stating the following:

Binance Markets Limited is not permitted to undertake any regulated activity in the UK. This firm is part of a wider Group (Binance Group).

Due to the imposition of requirements by the FCA, Binance Markets Limited is not currently permitted to undertake any regulated activities without the prior written consent of the FCA.

No other entity in the Binance Group holds any form of UK authorisation, registration or licence to conduct regulated activity in the UK.

The Binance Group appear to be offering UK customers a range of products and services via a website, Binance.com.

The FCA’s action mirrors a number of regulators across the globe that are now re-evaluating the risk crypto activities, in all forms, pose.  As a relatively recent arrival on the financial stage, cryptocurrency is often poorly understood by potential novice investors. The Binance Group has responded to the action taken by the FCA suggesting that the warning notice will have no impact on the services it offers as the company’s activities emanate from its Cayman Islands base.  However, Binance Markets Limited (BML) is an affiliate firm based in London that is now unable to undertake any activities unless it receives prior written consent from the FCA.

Demetri Bezaintes, an associate, remarks “Although the FCA does not directly regulate cryptocurrencies, it does regulate certain crypto asset derivatives and cryptocurrency exchanges are obliged to register with the FCA.  At first glance it would seem that Binance may be correct in saying there will be no impact,” Demetri further remarked “ however the FCA and other regulating bodies are concerned that the platform presents opportunities for illicit activity and exposes novice investors to risk.  It is hoped that the strong “we are watching you” message the FCA has sent to Binance will act as a warning to consumers and cryptocurrency exchanges alike.”

Part of the Binance Group, Binance Holdings, has already been the subject of a probe by the US Securities and Exchange Commission (SEC) relating to money laundering and tax issues. The Ontario Securities Commission (OSC) in Canada also reproached  Binance and other crypto trading platforms for failing to comply with the regulations and Japan’s Financial Services Agency (FSA) has issued two warnings in three years for illicitly operating in Japan without the required permission.

Giambrone’s banking and finance litigation group points out that the FCA is taking a wide range of steps to protect unwary and unknowledgeable retail clients from unwittingly becoming involved with fraud and illegal activities. Its role is moving towards overseeing anti-money laundering and obstructing the financing of terrorists.  The Economic Crime Plan 2019-2022 announced in July 2019 stated that from January 2020 the FCA will be the Anti Money Laundering and Countering Terrorist Financing (AML/CTF) supervisor for organisations dealing in particular crypto asset activity.  The new regime is intending to disrupt and stop money from being laundered through the use of cryptocurrency.

The FCA, following a consultation, compiled a Handbook and set out a policy, which came into force in January 2021,  prohibiting the sale of certain crypto assets to retail clients, stating “We believe that retail consumers can’t reliably assess the value and risks of derivatives (contracts for difference, futures and options) and exchange traded notes (ETNs) that reference certain cryptoassets.”

The FCA now has the freedom to challenge and pursue internet platforms from accepting advertising revenue related to fraud and other illegal activities. This another measure aimed at protecting novice investors.  The lawyers in Giambrone's banking and financial litigation group have extensive experience in a wide range of fraud linked to financial investment and transactions

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