Author: Josie Welland
30 June 2021
2 min read
The importance of the Financial Conduct Authority (FCA) banning Binance, the world's biggest crypto-currency exchange, from the UK cannot be overstated.
The UK’s financial regulator has ruled that Binance cannot conduct any regulated activity here. It has also issued a consumer warning about Binance.com, advising people to exercise caution regarding adverts that promise great returns on cryptoassets.
It is a significant moment in the regulator’s approach to cryptocurrency as, in practical terms, it prevents all of us in the UK from using Binance to speculate on cryptocurrency. The issuing of the warning to Binance’s UK entity is confirmation that it is sufficiently affiliated with Binance Holdings, which is believed to operate the Binance exchange. This may be the breakthrough that helps many overcome the jurisdictional hurdle that has, until now, been an obstacle to many cases. While each civil recovery case obviously depends on its merits, the FCA’s action may provide the assistance needed to establish sufficient jurisdictional nexus to the UK to enable recovery in the UK courts.
It should also be emphasised that the FCA is not the only regulator that has felt the need to act regarding Binance. The FCA’s action can be viewed as part of a regulatory offensive that has begun in various parts of the world. The United States’ Securities and Exchange Commission (SEC) is already reportedly investigating Binance Holdings, regarding money laundering and tax offences and issued a warning to consumers about Binance two months ago. In Canada, the Ontario Securities Commission said that Binance was one of a number of crypto trading platforms that were not complying with regulation. This prompted Binance to withdraw from Canada just last weekend – a day after Japan’s Financial Services Agency (FSA) gave Binance its second warning in three years for operating there while not having permission to do so.
Binance has stressed that it takes its compliance obligations very seriously and takes a “collaborative approach’’ with regulators. The terms and conditions on its website make it clear that it does conduct anti-money laundering and know your customer checks on those who use it. From personal experience, Binance is an exchange that features heavily in our civil recovery cases that go before the High Court. It is one of the exchanges that is preferred by bad actors. So, the requirement that the UK entity, Binance Markets Limited, must now “secure and preserve all records all records and/or information . . . relating to all UK consumers from its systems should greatly assist in the recovery process. In the past, there have certainly been cases where Binance has failed to cooperate with disclosure requests. This latest requirement could see this issue going away. If the UK entity fails to comply with such requirements, it could face enforcement action by the FCA.
While Binance may say it recognises the value of compliance – and may actually believe it does – it has shown itself to be prepared to move to new jurisdictions if the existing ones it functions in impose obligations that it does not like. Its reaction to the FCA’s action will become clear in the coming days and weeks. But it also remains to be seen if this most controversial of crypto exchanges attracts attention from the authorities in any more parts of the world.
Josie specialises in defending national and multinational white-collar crime cases. She has been involved in some of the most notable bribery and corruption, tax evasion, cryptocurrency, money laundering, fraud and asset recovery investigations.