The article first appeared in The Scotsman, edited for clarity and relevance by Anton Shmerkin
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And so, the story begins
Since the FCA issued the warning over the safety and security of cryptocurrency exchange Binance, it has been under greater scrutiny from customers, regulators and banks alike. The move came as part of a wave of international action from state authorities across the globe who have grown alarmed by crypto’s rapid rise and centrality to emerging avenues for money laundering and organised crime.
On June 21 the Chinese Government declared that it would be clamping down on the considerable amount of cryptocurrency mining taking place in the country, with the impact of the announcement seeing Bitcoin, Dogecoin and Ethereum prices tumbling. Bitcoin prices even dipped below the much-feared $30,000 threshold which many commentators claimed could result in mass selling off of the cryptocurrency and even greater volatility.
South Korea, another crypto hotspot, likewise seized the crypto assets of around 12,000 citizens accused of tax evasion which totalled over $47 million and the Metropolitan Police made the UK’s largest cryptocurrency seizure yet in a crackdown on laundering – seizing an estimated £114 million worth of cryptocurrency.
What is Binance Group?
What’s important to understand is that based primarily in the Cayman Islands, Binance Group has an assortment of entities worldwide which include London-based Binance Markets Limited.
Despite being recently awarded a Letter of Commendation sent by the UK South East Regional Organised Crime Unit for “cooperation in assisting our investigations relating to the Supply of Class A Controlled Drugs via the Dark Web,” Binance has now become a greater subject of scrutiny by regulators in the UK. The FCA said in their statement that Binance Markets Limited, a subsidiary of the larger Binance Group corporation, “is not permitted to undertake any regulated activity in the UK” and under FCA requirements cannot attempt to do so “without the prior written consent of the FCA”.
The FCA continued: “No other entity in the Binance Group holds any form of UK authorisation, registration or licence to conduct a regulated activity in the UK. “The Binance Group appear to be offering UK customers a range of products and services.”
Describing itself as ‘the world’s largest crypto exchange’, Binance and similar exchanges must be registered with the Financial Conduct Authority (FCA) in order to operate fully in the UK.
This decision from the financial authority comes after plans for a new regulated ‘Binance UK’ affiliate company and crypto exchange based in the UK failed to materialise. The FCA went on to warn British customers and consumers over-investing in cryptocurrency or crypto assets which are not regulated by traditional state or monetary authorities and operate on a decentralised basis.
Binance tweeted in response to say that the FCA’s notice “has no direct impact on the services” it provides on its exchange platform. According to the Binance website, “BML is a separate legal entity and does not offer any products or services. The Binance Group acquired BML May 2020 and has not yet launched its UK business or used its FCA regulatory permissions.”
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
The action from the FCA is not totally unsurprising, however, given that the huge crypto exchange’s company Binance Holdings Ltd. is also under investigation by multiple US federal departments including the US Justice Department, the Internal Revenue Service and the Commodity Futures Trading Commission for potential criminal activity. However, the FCA has a deadline of March 31 2022, which crypto asset businesses such as cryptocurrency exchange Binance must meet in order to continue trading in the UK.
Barclays takes action
The fact that Barclays itself has been marred in scandal for years, if not decades, doesn’t seem to bother one of the world’s largest multinational banks. On June 28, UK-based users of the cryptocurrency exchange Binance began reporting that after the confusion surrounding Binance’s future in the UK, they were unable to make Faster Payment withdrawals from their accounts on Binance’s website. Those logging into their account and preparing to make withdrawals were confronted with a notice that the payment channel allowing UK users to make fast withdrawals from their accounts in GBP sterling was ‘under maintenance.”
The decision left many users frustrated and sceptical as to the timing of this maintenance, with it coming just hours after news of the FCA’s ban on the platform broke online.
On July 5, Barclays informed UK customers who had previously made payments to Binance that it has blocked payments to the platform until further notice, telling customers that this was done “to help you keep your money safe”. Barclays customers received the following message: “As you’ve made a payment to the cryptocurrency exchange Binance this year, we wanted to let you know that we’re stopping payments made by credit/debit card to them until further notice. This is to help you keep your money safe. For further info please search FCA Binance online.”
A Barclays spokesperson said: “With effect from today, Barclays intends to stop credit and debit card payments to Binance. “This action does not impact on the ability for customers to withdraw funds from Binance. “The decision has been taken following the FCA warning to consumers, to help keep our customers’ money safe.”