In June the UK’s Financial Conduct Authority (FCA) banned Cayman Islands-based Binance, one of the worlds biggest cryptocurrency exchanges, from trading in the UK meaning that UK consumers are currently unable to withdraw or deposit using the British Pound.
The FCA said Binance Markets Ltd, Binance’s only regulated UK entity, “must not, without the prior written consent of the FCA, carry out any regulated activities … with immediate effect”.
“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.”
The FCA’s action came as other international authorities also struggle to regulate the industry amidst the boom of crypto services on offer. The UK followed suit with Japan, US & Canada who took the first steps in halting the massive expansion of Binance in an attempt to protect consumers and maintain control over the monetary system.
The more sinister reverberations of an unregulated crypto market is that it could become a hotbed for organised crime due to the ease with which cryptocurrencies can be used to facilitate crime and launder the proceeds.
However, there is wide-spread concern within the industry that this ‘ban’ strategy is not the long-term solution that the financial industry needs. For progress to be made an element of regulation will be required; however, this does not work well within an autonomous environment.
For adoption and acceptance there needs to be some form of regulation which is acceptable to the authorities and to the exchanges.
Progress in the right direction is being made, in January, the FCA banned companies’ sales of cryptocurrency derivates and exchange-traded notes to retail investors. These products allow people to bet on the price of assets such as bitcoin without actually buying them. Derivatives can multiply potential returns and losses many times over. A clear signal is being sent to the crypto market – they are being watched and they are on precarious ground.
The next steps will be interesting. Will the FCA finally update their compliance guidelines to better cater for the regulation of crypto trading platforms or will we see the crypto market take matters into their own hands and begin to take their responsibility to consumers, especially across permissions, marketing and social media more seriously?