The Financial Conduct Authority (FCA) has banned Binance Markets Limited – part of the Binance cryptocurrency trading platform – from undertaking any regulatory activity in the UK, and has issued a warning to consumers to be wary of crypto investments.
In a notice posted to its website, the FCA also said that by close of business on 30 June, Binance Markets must prominently display a notice disclosing it is not permitted to undertake regulated activity in the UK. It notes that no other entity in the wider Binance group holds “any form of UK authorisation, registration or license to conduct regulated activity in the UK”.
To the same timescale, it must also either remove or instruct to be removed any advertising or promotions it has live, and confirm to the FCA in writing that this has been done. By Friday 2 July, it must also secure and preserve all records and information it holds on any UK consumers so that they can be provided to the FCA on request.
In its consumer warning, the FCA said: “Be wary of adverts online and on social media promising high returns on investments in cryptoasset or cryptoasset-related products.
“Most firms advertising and selling investments in cryptoassets are not authorised by the FCA. This means that if you invest in certain cryptoassets, you will not have access to the Financial Ombudsman Service or the Financial Services Compensation Scheme if things go wrong.”
The FCA added that while it does not regulate cryptoassets like Bitcoin or Ether it does regulate some of their derivatives – futures contracts, for example – and cryptoassets it considers to be securities. Firms must be authorised by it to advertise or sell such products in the UK, and a full list of those that are allowed is available, as well as a warning list of those to be avoided.
It urged consumers to do more research on the products and firms they may be considering investing with – for example, by using Companies House to check if the firm is registered as a UK company and to establish the identity of its directors
“Always be wary if you are contacted out of the blue, pressured to invest quickly or promised returns that sound too good to be true,” said the FCA.
In statements shared with media over the weekend, Binance said that its Binance Markets unit – a fairly recent acquisition – had not yet been using its regulatory permissions and therefore the FCA’s crackdown would not affect the services offered on its main website.
A spokesperson said the platform takes its compliance obligations very seriously and actively keeps abreast of changing policies, rules and laws related to cryptoassets. The spokesperson added that Binance takes a collaborative approach to working with regulators.
Cryptocurrencies and the platforms that engage in the trading of crypto assets have become highly controversial, not least because of the excessive energy consumption – often outpacing that of nation states – required to mine the assets themselves, which makes them a huge source of carbon emissions and thus a major contributor to the climate emergency.
As a result, the UK is not the first jurisdiction to have clamped down on them. China recently ordered banks and online payment platforms to stop supporting crypto transactions, and banning mining activities in several jurisdictions, citing excessive power use. Binance is also the subject of regulatory interest in several other countries.
Moreover, their largely unregulated nature has also made cryptocurrencies a haven for criminal activity, scams and money laundering by cyber criminal crews, notably ransomware gangs. Some cyber security experts believe that the value of cryptocurrencies is now directly linked to the prevalence of cyber attacks to some extent.
Analysts at SonicWall recently posited the theory that the strength and increased value of bitcoin in the opening months of 2021 was a powerful motivational factor for people to turn to ransomware heists as an easy way to obtain the cryptocurrency that they believed would make their fortunes.
Last week, Binance revealed details of how it assisted in an international law enforcement investigation into Ukraine-based elements of the Cl0p (aka Clop) ransomware gang, which resulted in several arrests in June 2021.
Binance said it used anti-money laundering analytics technology to identify and map a network of rogue accounts exploiting its services to wash the proceeds of ransomware attacks by repeatedly depositing and withdrawing to each other. It then worked with blockchain analytics services to investigate the group further, leading to its identification, and real-world consequences.
It was also recently commended by the Oxford-based South East Regional Organised Crime Unit (Serocu) for its cooperation in assisting with investigations relating to the supply of Class A controlled drugs via the dark web.
Serocu said: “We look forward to collaborating with Binance to combat criminal [and] illegal activities in the cyber security space.”
