On Saturday, 26th June the UK’s FCA issued a statement. It starts: “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.”
According to the FCA, the Binance Group appears to offer UK customers a range of products and services via its website. The FCA then warns about investing in cryptoassets generally with the recommendation: “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 key point
The FCA confirms it does not regulate cryptoassets – like Bitcoin or Ether. But it does regulate some cryptoasset derivatives. These include financial products like:
- futures contracts
- contracts for difference
- those cryptoassets which the FCA considers to be ‘securities’.
In effect, the FCA must authorise a business to advertise or sell such products in the UK. Indeed the FCA offers:
- an online register for would-be investors to check if a business has the necessary FCA authorisation
- an online Warning List of businesses to avoid.
Enterprise Times: what does this mean
The FCA, by intervening, confirms that regulators are now starting to crack down on the ‘cryptocurrency industry’. The concern would appear to come in three parts:
- illicit activities, such as money laundering and fraud
- often weak consumer protection
- the potential for systemic problems in the financial system (even though crypto products represent only a small percentage, so far, of total finance system activity).
The FCA is joining others. BaFin in Germany, in May, cracked down on Binance concerning ‘stock tokens’. Similarly, in March, Japan’s Financial Services Agency suspended Binance’s offerings to the Japanese.
Whether the FCA and other regulators extend their actions beyond Binance remains an open question. Are regulators making an example of Binance? Or, are other crypto market-shrinking regulatory interventions on the way? Meanwhile, as the BIS has warned long before, consumers (investors) should beware of cryptoassets.