The UK's financial watchdog has fired a warning shot across the bow of Binance, and ordered it to place a notice on binance.com scaring off Brit crypto fans.
This seems to have come about because Binance, which is ultimately based in the Cayman Islands, wanted to launch an exchange in the UK using its London-based affiliate Binance Markets Ltd. Since the start of the year, cryptocurrency firms in Britain have had to register with the nation's Financial Conduct Authority and meet its anti-money-laundering and anti-terrorism-funding requirements.
Binance hasn't done this yet, or as the FCA itself put it, Binance has demonstrated an "imposition" to the regulator's rules.
As a result of that, over the weekend the regulator let the world know that Binance Markets Ltd "is not currently permitted to undertake any regulated activities without the prior written consent of the FCA."
The watchdog added: "While we don't regulate cryptoassets like Bitcoin or Ether, we do regulate certain cryptoasset derivatives (such as futures contracts, contracts for difference and options), as well as those cryptoassets we would consider 'securities'. A firm must be authorised by us to advertise or sell these products in the UK."
That basically means Binance can't, for now, launch its exchange in the UK nor promote its services in Blighty. The offshore biz can still offer cryptocurrency trading – the buying and selling of coins – through its website to those in the UK. Binance was issued the following notice by the financial authority:
By close of business on 30 June 2021, the Firm must display, in a prominent place on the website www.binance.com and any other communication channels or social media, including but not limited to, the Binance mobile and desktop applications, a notice stating:
“BINANCE MARKETS LIMITED IS NOT PERMITTED TO UNDERTAKE ANY REGULATED ACTIVITY IN THE UK. 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 license to conduct regulated activity in the UK).”
For its part, the crypto-exchange said the "FCA UK notice has no direct impact on the services provided on binance.com. Our relationship with our users has not changed."
The FCA, meanwhile, said the biz "must secure and preserve all records and/or information (physical or electronic) relating to all UK consumers from its systems in their original form, or in a copy proved to be identical to the material source." It also warned punters to be "wary of adverts online and on social media promising high returns on investments in cryptoasset or cryptoasset-related products."
Last Wednesday, Binance emitted a blog post bragging about how it helped take down "a prolific cybercriminal ring responsible for laundering $500m in damages from ransomware" in what may have been a move to preempt news coverage of the FCA's weekend action.
Binance claimed it played a leading role in derailing the Clpp and Petya ransomware gangs, which it dubbed Fancycat, and bringing about the arrest of suspected Clop members earlier this month. Never mind that Binance seemingly was unable to meet the FCA's anti-money-laundering rules, the cryptocurrency exchange boasted that its in-house anti-money-laundering "detection and analytics program detected suspicious activity," and that we'll have to take Binance's word for it that this analysis led to the cuffing of alleged ransomware gang members.
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The Ukrainian cops' statement about the arrest of Clop suspects made no mention of Fancycat but did say Clop had extorted $500m from its victims – and that the suspects were to be charged with money laundering. Binance was previously mentioned by the police in Ukraine as having worked with them on a 2020 case.
Some have speculated that the Ukraine police's arrests were not to do with the core Clop extortionist gang and merely focused on their money launderers, some steps removed from the criminals operating the ransomware itself.
Cryptocurrency's decentralised nature has made it a natural fit for international criminals wanting difficult-to-trace payments from ransom victims. While some digital currencies such as Bitcoin are fairly straightforward to trace, others are less so. ®