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Cryptocurrency exchanges have been under increased scrutiny from regulators in Japan, the United Kingdom, and the Canadian province of Ontario. Binance has found itself in the sights.
Binance, the world’s largest cryptocurrency trading platform, has experienced regulatory turmoil in the last week as governments cracked down on the use of illegal exchanges and cautioned residents against using them. Binance’s use of the name “global exchange” has done nothing to please regulators who demand specialised licences to provide financial services to their citizens.
The following is a quick rundown of recent regulatory actions involving Binance.
On June 25, Japan’s Financial Services Agency, or FSA, accused Binance of operating without proper registration in the nation, potentially laying the groundwork for a lengthy legal battle with authorities. This is because, in contrast to other countries, Japan has had explicit registration and operating requirements for cryptocurrency exchanges in place since at least 2018. Binance chose to relocate its operations to Malta in 2018 rather than comply with the guidelines.
The FSA’s warning does not just apply to Binance. In May of this year, the regulator issued a warning to derivatives exchange Bybit for violating registration regulations.
Around the same time that Japan’s FSA issued its warning, Binance declared that it will suspend all operations in the Canadian province of Ontario after the provincial securities regulator enacted broad new cryptocurrency exchange-targeting regulations.
The Ontario Securities Commission, or OSC, announced new prospectus and registration requirements for cryptocurrency exchanges on April 19. Using that as a guideline, the OSC singled out two cryptocurrency exchanges – Bybit and Kucoin – for allegedly “flouting” Canadian securities rules. Instead of complying with the new rules, Binance opted to quit the market altogether, allowing customers until the end of the year to sell and terminate their accounts.
Binance made news again on Sunday after the Financial Conduct Authority, or FCA, of the United Kingdom ordered the exchange to cease all “regulated activity” in the nation. Many took this as a blanket prohibition on using Binance to purchase and sell cryptocurrency in the United Kingdom. Meanwhile, users say that transactions in the local pound Sterling currency have been banned.
Binance claims that the FCA notification applies to Binance Markets Limited, a different legal entity purchased by the company in May 2020. As a result, it “does not offer any products or services via the Binance.com website,” according to the firm.
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.”