UK regulator clamps down on Binance

https://www.bbc.com/news/business-57632831

by lakis • 5 years ago

408 173 5 years ago

n_ary• 5 years ago

While the FCA does not regulate crypto-currencies, it does regulate cryptoassets. Firms must be authorised [...]to advertise or sell such products in the UK.
This means that people in the UK are not allowed to use Binance's services to speculate, or bet
However, they are still allowed to use the website to purchase and sell crypto-currencies, which is not regulated

So, all is well, just don't bet, speculate. Just buy and sell?

ipnon2• 5 years ago

Binance offers a variety of derivatives, synthetics and even user created tokens. The cynical take is that crypto threatens the City of London's monopoly on products like these.

d4rti2• 5 years ago

The more rational take is that the FCA is acting to protect UK citizens from potentially dangerous financial products from an unauthorized organisation.

xwolfi2• 5 years ago

I think if Binance did all the same paperwork and processes as any other banks then it d be fine and the city would welcome them with open arms.

calpaterson• 5 years ago

This is transparent nonsense because there is absolutely no overlap between the medium or large-sized business that wants to buy derivatives from JP Morgan and the retail investors who want to buy bitcoin.

Are Rolls Royce (turbine manufacturer and part-time hedge fund) about to start buying forex derivatives from Binance? Seriously, seriously doubt it.

JWoolfenden• 5 years ago

Yeah, failing to comply with the FCA is a bold move for sure.

belter2• 5 years ago

Ignoring regulations did not seem to hurt AirBnb, Uber or Facebook...

ghalvatzakis• 5 years ago

This means that people in the UK are not allowed to use Binance's services to speculate, or bet

What will happen to the people that already bought such assets?

celticninja3• 5 years ago

You can still buy them and sell them. What you can't do is use leverage to bet on changes in the price as, for example, you can on https://www.plus500.co.uk/

Or any other number of Forex sites. These sites usually come with a warning that most users lose money. That you can lose more money than you have staked is the issue, but (I am assuming) the larger possible swings with crypto mean that both the upside and downside is even greater than with traditional fiat currency trading.

rjknight• 5 years ago

The distinction here is between buying and selling Bitcoin, and buying and selling contracts for difference or spread betting on Bitcoin’s price movements. The latter is more tightly regulated, as it can result in much larger gains or losses, including losses greater than the staked amount.

shoshino2• 5 years ago

Spreadbetting is tax-free in the UK and the FCA banned spreadbetting on bitcoin last year. IG, CMC and CityIndex all closed out client positions and delisted all crypto pairs.

adevx• 5 years ago

"including losses greater than the staked amount" I don't think this is true. Binance will happily liquidate you well in advance of a possible negative balance.

Zenst2• 5 years ago

The crux really is the FCA raising a red flag so people who wouldn't normally think will maybe think before buying into the latest `invest in crypto` advert that have become widespread and the latest FOTM(flavour of the month).

The other aspect for the FCA doing this, will be to curtail calls etc by those who get burned and go running to the FCA who can point out they told you so and it is nothing they can do as not under their remit.

But yes, binance operates outside the UK (Cayman islands - which for me is always a red flag for anything finance), so the net effect upon operation will be zero. However, marketing wise - the foundations have been laid.

One upshot of all this I hope is that web adverts (including youtube etc) may have to filter out these crypto investment ones and see UK residence not see any of them. Least that is my dream hope from this.

shoshino2• 5 years ago

> This means that people in the UK are not allowed to use Binance's services to speculate, or bet
> However, they are still allowed to use the website to purchase and sell crypto-currencies, which is not regulated

These statements have since been removed from the article, because they're incorrect.

egorfine• 5 years ago

"BML is a separate legal entity and does not offer any products or services via the Binance.com website," said a Binance spokesman.

flixic• 5 years ago

BML actually stands for Binance Markets Limited, but my first thought was Binance Money Laundering.

SideburnsOfDoom• 5 years ago

I recall seeing that Binance has a few dozen employees total, worldwide. This limits exactly how "separate" it can be, right?

elliekelly3• 5 years ago

And, in my experience, the FCA doesn’t find this sort of pedantry too convincing. Where US regulators tend to more be deferential to each entity being separate (provided you’ve jumped through a few small governance hoops) the FCA tend focus on how the entities are actually functioning rather than what the paperwork says.

dw-im-here• 5 years ago

This is good for bitcoin

3np2• 5 years ago

Bloomberg article with existing discussion: https://news.ycombinator.com/item?id=27651730

cblconfederate• 5 years ago

... to clear the room for competitors

nullc2• 5 years ago

In the UK there are many "contract for difference" exchanges, basically bucketshops. These products are outright unlawful in the US or at least are unlawful in retail-accessible forms.

My understanding is that this action is only about CFD products on binance, not normal buying/selling Bitcoin.

I find it weird that the UK allows so much access to these scam products in general, but I suppose it fits in with the general accessibility of gambling.

nmca• 5 years ago

Could you outline why you think CFD is a scam?

nullc2• 5 years ago

There are three layers to it:

(1) CFD isn't an investment, it's just a side bet on the price of something else. It distorts the market for the underlying (by providing a highly uncontrolled supply of it) at the expense of creating tail risk (e.g. CFD house is fine for years and then poof everyone's money is gone). The damage from this doesn't apply to just CFD participants but potentially the market as a whole.

(2) The particular mechanism of CFDs make them extremely ripe for fraud. CFD contracts are against the house so the house has an inherent conflict of interest with their customers. The CFD house can crunch the numbers, blow some money on the real market (or whatever subset contributes to their index price) to dip the price and wipe out a particular set of customers. Sometimes the index prices are based just on bid/ask -- there doesn't even need to be a real trade at the price. Manipulation is hard to detect, and the whole setup where the house is betting against you is unlike the normal situation for investments.

It's even the case that CFD operators-- in the rare case where they detect a customer that appears to actually have positive returns, maybe due to insider info-- will start passing their orders through to another platform, and even riding along/front running them!

(3) Specific CFD products usually have unreasonable terms such as absurd leverage where market volatility almost guarantees the customer will be wreaked. In theory some of this risk could be regulated out, but one can always construct a new product.

So I think sure, you could have an honest CFD house with good controls and products with well shaped risked, and so on... and mitigate a lot of the problems but the incentives are all wrong. And worse, because much (though not all) of the CFD appeal is essentially to a gambling market, the customers actually want the highly volitional highly risky options, they want platforms that will be cheap until they implode, and so on. So in the long run, you shouldn't expect CFD operations to end well.

Other products like ordinary options, or just regulated margin, let you make more complex trades without creating the bad incentives or market risks.

mnd999• 5 years ago

Share purchases in the UK attract stamp duty, so a CFD is a useful way to get exposure to an equity without paying the tax.

throaway46546• 5 years ago

The Ferengi Commerce Authority isn't to be trifled with.

0x0nyandesu• 5 years ago

Leaving the Tower of Commerce, Brunt had this to say, "The Ferengi commerce authority will not sit idly by and allow profits to be made without getting our share. Let this be a lesson to all financial markets traders."

mkr-hn• 5 years ago

I didn't even know they had jurisdiction on 21st century Earth.

mrleinad• 5 years ago

Quark's trip to the past seems to have had unintended consequences.

spmurrayzzz• 5 years ago

I am so glad I am not the only person that thought this was a DS9 parody headline

freedomben• 5 years ago

Haha, exactly what I came here to say.

Brunt, FCA!

myself248• 5 years ago

Here I was wondering what Fiat Chrysler Automobiles was doing with Binance in the first place. Thanks for clearing that up!

_xnmw• 5 years ago

Good. A precursor to banning crypto itself, I hope. The government SHOULD have a monopoly on certain things, like lethal force (armies), and issuance of currency, because total chaos and anarchy would happen otherwise.

folli• 5 years ago

I agree about the lethal force aspect, but can you elaborate on how issuing currency results in chaos and anarchy?

Zenst2• 5 years ago

Anything that can impact a countries control upon their own currency has the potential to destabilise things.

Now whilst cypto is another currency, it is one that is very volatile and as we have seen, anything that volatile in a currency is always never good for the majority.

Also to have any impact, such crypto's would need to become more widespread and whilst in geek land we may view things as common usage, your average citizen probably at best only just aware of their existence. Indeed I'd hazard a guess that most people in any country have never held currency beyond their local offering (though the dollar sure does come close and that in some countries).

ezekg• 5 years ago

If a government has a monopoly on violence, then its citizens have no recourse to correct an evil or corrupt government. History shows time and time again that this is the case. In the case of the USA -- I don't think anybody here should want our government to have a monopoly on violence, given the USA's violent history. Trading such liberty for a sense of false security is unwise, in my opinion. The USA's founding fathers knew this.

Geee9• 5 years ago

The idea of Bitcoin is that no one has the power to issue currency. Issuance is limited to 21 million units and all of them are created with energy. No one should have the power to issue currency.

hhmc6• 5 years ago

Bitcoin has an annualized volatility of around 100%

In what sense can it be a useful currency?

haskellandchill2• 5 years ago

Do you not see the glaring inconsistency in your statements? "No one has power to issue currency! Bitcoin is issued currency!"

colesantiago• 5 years ago

A precursor to banning crypto itself...

Is it? How would you go about banning crypto completely such that nobody uses it?

analognoise3• 5 years ago

Well all the transactions are public. So I assume you freeze the assets of everyone involved in the exchanges. Then if they operate in a country beyond your reach, you embargo that country or apply other geopolitical pressure - you don't finance local development, or military assistance, or vote against whatever they want in NATO, whatever. Most countries have agreements in place for financial regulation and will gladly hand someone over who breaks a US banking law.

Then whenever you trace it to one of your citizens, you throw them in jail. This would destroy the exchanges, and prevent most people from participating in it (even as a curio).

It would be ultra easy to destroy crypto. If the US, Europe or China bans it for real, it will be worthless overnight. Nobody cares more about crypto than pissing off any of them.

I think all major countries are gearing up for this and it will happen eventually.

majinuub• 5 years ago

This guy glows

streamofdigits2• 5 years ago

There is a morbid satisfaction watching the formal financial system tie itself in knots as it tries to come to terms with an even worse version of itself.

That large part of the financial system is glorified and useless gambling designed to extract rents by intermediaries is a matter of record [0]. Regulators have no problem with that, provided their rather arbitrary and self-servingly generous red lines are respected.

So what is happening now is that new information technology (faulty and immature at best) is being used by cunning operators to tap into that ingrained behavioral pattern outside their purview.

Yet what spoils the fun is the sense that (somewhere in a parallel universe) all the new digital gadgetry could somehow be used to make our economies more robust, more functional, more equitable, more sustainable,... more real and less financialised.

[0] https://en.wikipedia.org/wiki/Financialization

bvaldivielso• 5 years ago

That large part of the financial system is glorified and useless gambling designed to extract rents by intermediaries is a matter of record [0].

Financialization is not necessarily about useless finance taking bigger and bigger roles in the economy. Finance can be useful, and can get very complex, and so it could make sense that it became a big part of the economy. Now, I cannot say for sure that the finance industry is useful enough for it to be that big a part of the economy as it is, but I'm open to the idea (also open to the opposite idea). My point is that what you portray as a "matter of record" is a biased interpretation of what financialization is, not consensus (though may still be true).

streamofdigits2• 5 years ago

The wiki entry covers some disparate topics but serves as a broad brush pointer to the massively growing gdp share of the financial industry. It is a proxy for the number of redundant financial transactions (where bits are simply shifted around in zero sum re-allocation games for which intermediaries get a cut) to actual economic transactions where something "real" happens.

There is obviously a bit of subjectivity in defining "real" and "useful". There is also an intermediate gray area of so-called risk management (derivatives, securitisation etc) which can easily mutate from useful to disastrous depending on the quality of regulation.

But when I look at the crypto universe (from the ICO era till today) I have no doubt what it resembles...

ohbleek• 5 years ago

Title is misleading. Change it.

deepvibrations• 5 years ago

As much as I hate the 'FUD' label often given to anything negative in the crypto space, it is disappointing that even the BBC cannot use an honest title. Binance is not 'banned' as they say- this is misleading. I am in the UK and still using it, it is only the derivatives products that have been banned.

d_theorist• 5 years ago

I am still using it too. The BBC article is about as clear as mud, and I doubt that the person who wrote it even understood the story.

elliekelly3• 5 years ago

it is only the derivatives products that have been banned.

This isn’t correct. It’s any regulated asset that’s been banned. Well... has always been banned. That includes derivatives but also “cryptoassets”. The distinction comes down to whether the FCA considers the product a “security token”, “e-money”, or currency. The first two being prohibited for sale by or through Binance (or any unauthorized entity) without first obtaining the FCA’s permission as they’re regulated products.

More info about the distinction here: https://www.fca.org.uk/firms/cryptoassets

avvt4avaw• 5 years ago

I thought it was worth clarifying exactly what has happened here, since neither the BBC nor the FT articles make it particularly clear.

The entity that the FCA has acted against is Binance Markets Limited (BML) which the parent Binance Group acquired earlier this year, in part because of its existing registration with the FCA which allowed it to carry out a limited range of regulated activities in the UK.

The FCA has now placed restrictions on BML which remove its ability to carry out those regulated activities -- however BML was not actually doing any business in the UK so the effect of this is limited.

The FCA also issued a consumer warning which, among other other things, reiterated that no entities in Binance Group are registered with the FCA and therefore cannot carry out regulated activity in the UK. Again, the impact of this is limited since the entity that you interact with when using the Binance.com website is not based in the UK, and the FCA does not have jurisdiction over it.

A possibly outcome is that Binance will be a bit more circumspect about offering derivatives trading to UK retail because they want to build a more substantial UK business in the future. We saw this with Bybit a while ago, where they do not allow UK retail to use their website (although they have an exception for sophisticated investors, who can self-certify as an eligible counterparty and continue to trade on Bybit). I wouldn't be surprised to see this.

yholio• 5 years ago

Again, the impact of this is limited since the entity that you interact with when using the Binance.com website is not based in the UK, and the FCA does not have jurisdiction over it.

Why would you say that? Providing services to any British citizen over the internet will fall squarely within the regulatory domain of the UK, regardless of the website used to connect, the physical location of the server or the jurisdiction of the company.

read_if_gay_• 5 years ago

Right, just like Facebook is certain to adhere to European privacy laws.

Communitivity• 5 years ago

The FCA has no enforceable jurisdiction over Binance, because Binance's physical and financial assets are not in the U.K. - except they do have an office that could be seized, 3 Beeston Pl, London. It might be no more than a token office though.

They seem to have a number of offices in places, one per country. The US one is in Fresno, CA.

Their headquarters is in Malta.

They sell derivatives, and they are headquartered in Malta. Who actually uses good or services from these people?

mariallery• 5 years ago

This might well be by law, but in practise we don't see that, which i would argue is of higher meaning.

pessimizer• 5 years ago

LONDON, June 28 (Reuters Breakingviews) - Regulators have gotten their heads around crypto assets. The next challenge is getting their hands on the companies. Britain’s Financial Conduct Authority on Saturday said that Binance Markets, the local arm of the world’s largest crypto exchange, was “not permitted to undertake any regulated activity in the UK”. Shortly after, the company said on Twitter that the notice has “no direct impact on the services offered on Binance.com”.
How can that be? In general, the FCA can only regulate companies that are either based in Britain or that actively promote products there. A bitcoin trading platform registered elsewhere doesn’t necessarily count: according to Forbes Binance is based in the Cayman Islands. Founder Changpeng Zhao sought regulatory approval for Binance Markets, but its main services are unregulated and offered instead by the parent group. It’s not clear what he did to irk the FCA, or whether his customers will care. What’s obvious, though, is that the watchdog lacks powers to police a fast-growing part of the financial sector. (By Liam Proud)

Futile UK crypto curb flags regulatory blind spot

https://www.reuters.com/breakingviews/futile-uk-crypto-curb-...

itsoktocry2• 5 years ago

The FCA also issued a consumer warning which, among other other things, reiterated that no entities in Binance Group are registered with the FCA and therefore cannot carry out regulated activity in the UK.

The "impact" of this is that the regulators are beginning to take actions against the wild-west of the crypto world, regardless of how toothless each individual action is.

Put aside your opinions of cryptocurrencies as a technology...there's no way sovereign governments were going to let this fly. There fireworks are just starting.

lbriner• 5 years ago

I'm not sure what they realistically do. They regulate banks but at least banks have deep enough pockets to pay the fines. What do you do when 18 and 21 year old brothers get hacked and lose $100M+?

Well, you say, they wouldn't get registered because they wouldn't have what they would need to provide a fair risk to customers. Then what? People will simply run the exchanges elsewhere and the money will keep getting "lost", "stolen" or seized by the authorities.

rawtxapp3• 5 years ago

Are you saying that crypto world wasn't regulated thus far? You realize that's not the case right? SEC and CFTC rules still apply and they have sued companies/people in the crypto space already. These companies and people also have to comply with IRS laws around taxation. Pretty much all of them have stringent KYC/AML verification systems.

ernopp2• 5 years ago

Indeed. There was a great article in the FT on this looming battle recently:

Human society, the historian Niall Ferguson says, oscillates between the dynamic of a metaphorical “tower” and the “square”. Sometimes institutions or leaders control social groups in hierarchical ways, just as church towers overshadowed medieval European cities.
At other times, horizontal networks shape events, operating like crowds in ancient city squares. The “square” used to work best in small, face-to-face groups, but digitisation now enables peer-to-peer systems to operate on a massive scale.
Now, however, a “tower” dynamic is entering the frame. On Wednesday, the Bank for International Settlements (the central bankers’ bank that, in a delicious irony, occupies an actual black tower in Basel) issued a striking report that lashed out at the “square”.

https://www.ft.com/content/9481d93d-c7ef-4749-9916-bc860d538...

jimmaswell• 5 years ago

Citizens need to push back more if they want to keep any rights. UK citizens have a poor track record of this, gladly giving up most of their guns and having nothing to say about the absurd anti-knife campaign and fining people for nazi jokes, but they did start having some large-scale protests at the prospect of further lockdowns so maybe they're starting to grow some spine.

monkeydust• 5 years ago

Most players in crypto space including exchanges want regulation. It wil legitimize the space and that will in turn allow more institutional money to flow in.

emouryto2• 5 years ago

... in the UK.

kerng• 5 years ago

There seem to be a lack of understand of spot vs. derivative markets here in this forum...

nomoreplease• 5 years ago

I'm surprised $BTC's price has gone up despite this news.

Actually I'm always surprised by BTC

haskellandchill2• 5 years ago

Price is based on nonsense so I'm not surprised. With the shady exchanges and other suspicious players what does price really mean?

tomtomistaken• 5 years ago

Get your $BTC before exchanges are gone?

cpuguy83• 5 years ago

"Brunt, FCA!"

I'm just picturing Brunt from ST:DS9 walking in and shutting them down.

digianarchist• 5 years ago

They've also ceased operations in Canada's largest province: https://www.coindesk.com/binance-pulls-out-of-ontario-follow...

px43• 5 years ago

For those unfamiliar with the cryptocurrency space in general, Binance is the world's largest exchange because they are a global platform. They don't need to cater to western regulations. These regulations aren't cutting Binance out of western markets, they're cutting western citizens out of the largest cryptocurrency market, forcing them to use VPNs and other technologies to bypass the geo blocking.

There are plenty of localized exchanges, like Coinbase, who play well with the regulators in certain geographies. This is not the market that Binance cares to cater to, and that's fine IMO. I'll never use Binance because as a US citizen, I don't feel like my deposits are safe there, mostly because US financial authorities love seizing bank accounts from companies they don't like. This is why the only crypto to USD bridge that I'll use is Coinbase.

I feel like this stance is incredibly detrimental to the future of the economy of the country that I live in, but here we are. Hopefully US regulators (and Canada and UK etc) will realize the long term damage that they're doing before it's too late.

UK regulator clamps down on Binance

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