The world’s largest cryptocurrency trading platform, Binance, has faced regulatory upheaval over the past week as jurisdictions clamped down on the use of unauthorized exchanges and warned citizens against accessing them. For Binance, adopting the moniker of “global exchange” has done very little to appease regulators that require specific licenses to offer financial services to their citizens.
Below is a brief recap of recent regulatory actions surrounding Binance.
On June 25, Japan’s Financial Services Agency, or FSA, accused Binance of operating in the country without proper registration – potentially setting the stage for a protracted legal battle with regulators. That’s because, unlike other jurisdictions, Japan has carved out specific registration and operating rules for cryptocurrency exchanges since at least 2018. Rather than comply with the directives, Binance decided to move its operations to Malta in 2018.
The FSA’s warning isn’t limited to Binance, either. In May of this year, the regulator warned derivatives exchange Bybit that it was in violation of registration rules.
Around the same time that Japan’s FSA issued its warning, Binance announced it would cease all operations in the Canadian province of Ontario after the provincial securities regulator introduced sweeping new measures targeting cryptocurrency exchanges.
On Apr. 19, the Ontario Securities Commission, or OSC, introduced new prospectus and registration requirements for crypto exchanges. Using that as a benchmark, the OSC singled out two crypto exchanges – Bybit and Kucoin – for allegedly “flouting” Canadian securities laws. Rather than comply with the new edicts, Binance decided to exit the market entirely, giving users until the end of the year to liquidate and close their accounts.
Binance was in the headlines again on Sunday after the United Kingdom’s Financial Conduct Authority, or FCA, ordered the exchange to halt all “regulated activity” in the country. This was interpreted by many as a blanket ban on using Binance to buy and sell cryptocurrencies in the U.K. In the meantime, transactions in the local pound Sterling currency have reportedly been blocked, according to users.
Binance asserts that the FCA notice pertains to Binance Markets Limited, which is a separate legal entity acquired by the firm in May 2020. As such, it “does not offer any products or services via the Binance.com website,” the company said.
We are aware of recent reports about an FCA UK notice in relation to Binance Markets Limited (BML).
BML is a separate legal entity and does not offer any products or services via the https://t.co/QILSkzx7ac website. (1/4)
— Binance (@binance) June 27, 2021
Nevertheless, from June 30 onward Binance must notify U.K. users of the FCA’s restrictions on its website and mobile apps.
In April of this year, Germany’s Financial Supervisory Authority, or BaFin, warned Binance that it could be fined up to $6 million, or 5 million euros, for offering security-tracking tokens without an investor prospectus. Specifically, BaFin raised issues with digital tokens that track blue-chip stocks like Microsoft, Apple and Tesla. According to the Financial Times, Binance told the regulator that its digital stock tokens are not securities because they are purchased through a third-party broker and cannot be transferred to other exchanges.
Binance operates in the United States through a dedicated trading desk called Binance.US, but it too has faced scrutiny in recent months. In May of this year, it was reported by Bloomberg that Binance is under investigation by the Justice Department and Internal Revenue Service in a joint money-laundering and tax evasion probe.
Changpeng Zhao, Binance’s CEO, refuted the title of the report by drawing attention to the fact that Binance cooperated with U.S. law enforcement agencies to “fight bad players.”
The “news” title is bad. Article itself isn’t so bad actually (but who reads). It described how @binance collaborated with law enforcement agencies to fight bad players, but somehow made it look like a bad thing… Anyways. Back to work.
— CZ Binance (@cz_binance) May 13, 2021