Latest sign of a growing crackdown on cryptocurrency market from regulators around the world

Binance, regarded as the world’s largest cryptocurrency exchange, has been banned from operating in the UK by the country’s markets regulator.

The ban is the latest sign of a growing crackdown on the crypto market around the world. Britain’s Financial Conduct Authority (FCA) reported on the weekend that Binance Markets Limited, the UK division of Binance, “is not permitted to undertake any regulated activity in the UK”.

From June 30, the company, which already offers Brits crypto trading through its website, must add a notice in a prominent place in its website and apps showing UK users the following text:

“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 licence to conduct regulated activity in the UK).”

Withdrew applications to register with FCA

Binance was set to launch its own digital asset marketplace in Britain. However, it was one of several crypto firms that withdrew applications to register with the FCA due to not meeting anti-money laundering requirements.

“Binance Markets Limited withdrew their 5MLD application on 17 May 2021 following intensive engagement from the FCA,” a spokesperson for the FCA told CNBC The spokesperson added, “the action taken today on Binance Markets Limited has been in train for some time.”

The FCA spokesperson clarified that the scope of the ban was limited. Though Binance Markets Limited is banned from offering regulated services in Britain, non-registered firms can still interact with UK consumers. That means Binance could still offer Brits crypto trading through its website.

A Binance spokesperson told CNBC, “the FCA UK notice has no direct impact on the services provided on Binance.com … Our relationship with our users has not changed”.

The spokesperson added: “We take a collaborative approach in working with regulators and we take our compliance obligations very seriously… . We are actively keeping abreast of changing policies, rules and laws in this new space.”

Laith Khalaf, financial analyst at AJ Bell, told CNBS via email: “The FCA has stated that Binance is not permitted to conduct regulated activities in the UK… . Providing access to cryptocurrencies itself is not a regulated activity, but offering derivatives is, which is presumably the activity the FCA is clamping down on.”

Increased regulatory scrutiny

The FCA isn’t the only regulator clamping down on the crypto industry. Japan’s Financial Services Agency warned last week that Binance was operating in the country without its permission.

Meanwhile, China has stepped up efforts to stamp out crypto speculation, ordering digital currency miners to cease operations in a number of regions and urging banks and payment firms not to offer crypto-related services.

Increased regulatory scrutiny has weighed on the nascent crypto market. Bitcoin had a solid start to the year, rallying to an all-time high of almost US$65,000 in April.

But it’s since almost halved in value, trading at US$34,783 as of Monday morning.

“This isn’t a step change in regulation which is going to knock the crypto craze on the head, but it is part of a growing trend of regulatory intervention in crypto markets,” Khalaf said, referring to the FCA’s restrictions on Binance.

“The idea that policy makers are simply going to allow a decentralised shadow payments system to emerge without any regulatory oversight is fantastical, and if the use of cryptoassets becomes more widespread, we can expect beefed-up regulation to follow suit,” Khalaf said in conclusion.