Bitcoin exchange Binance banned from UK as crypto frauds double

The City watchdog has banned one of the world’s largest Bitcoin exchanges from operating in Britain amid mounting fears over the rise of cryptocurrency crime.

The Financial Conduct Authority ordered Binance Markets Limited to remove all advertising and financial promotions by Wednesday and told the firm it must not carry out any regulated activities in Britain without prior consent.

The FCA’s action comes just two days after the Japanese financial regulator issued a consumer warning against Binance. US and German regulators have also raised concerns over the firm’s activities.

The move is part of a broader crackdown on unregulated crypto activity in the UK.

In January, the FCA became the anti-money laundering and counter-terrorist financing supervisor for cryptocurrency firms. Since the beginning of the year, crypto-related businesses have been required to register with the watchdog before doing business in the UK, though most firms have been granted “temporary registration” until July.

The watchdog’s Mark Steward said last week that 111 “high risk and volatile” unregulated crypto firms were still operating in Britain, posing a “very real risk” to consumers.

The FCA said that Binance withdrew its application to become a regulated entity last month following “intensive engagement” with the watchdog.

It said that of the cryptocurrency firms it had assessed to date, over 90pc had withdrawn their applications.

Changpeng Zhao

Binance, founded by Canadian-Chinese developer Changpeng Zhao, is one of the largest cryptocurrency exchanges globally

Credit: Bloomberg

A spokesman for the FCA said: “A significantly high number of cryptoasset businesses are not meeting the required standards under the money laundering regulations, which has resulted in an unprecedented number of businesses withdrawing their applications.

“The action taken today on Binance Markets Limited has been in train for some time.”

From Wednesday, the firm will have to display a prominent message on its website and mobile app warning consumers that it is not permitted to undertake regulated activity in the UK.

The FCA also ordered that the firm secure and preserve all records relating to its British consumers in their original form to be provided to the watchdog on request.

Binance is one of the largest cryptocurrency exchanges globally. Founded by Canadian-Chinese developer Changpeng Zhao, the firm launched Binance Markets Limited last year as a platform for UK investors to buy and trade cryptocurrencies with Pounds and Euros.

A Monzo card

In May, banks including Monzo, Barclays and Starling blocked customers from transferring money to platforms including Binance and SwissBorg

Credit: Monzo

The FCA issued a warning to consumers that no other entity of the Caymans Island-based Binance Group holds any form of authorisation, registration or licence to conduct regulated activity in Britain.

Last month the company came under investigation from the US’s Justice Department and Internal Revenue Service, as part of a probe into money laundering and tax offenses, according to Bloomberg.

In April, the German financial watchdog warned the firm that it could be fined for offering securities-tracking digital tokens without publishing an investor prospectus.

Binance could not be reached for comment.

The watchdog’s action echoes a broader move in the financial services sector against unregulated cryptocurrency firms.

In May, banks including Barclays, Monzo and Starling blocked customers from transferring money to platforms including Binance and SwissBorg, citing “high levels of suspected financial crime with such payment”.

The number of cryptocurrency investment frauds reported to authorities doubled last year as the price of Bitcoin skyrocketed.

Action Fraud, the national reporting centre for cybercrime, received 7,014 complaints in the year to March 2021 compared with 3,608 in the previous 12 months, the law firm Pinsent Masons said.

Fraudulent schemes ranged from criminals impersonating popular cryptocurrency advocates such as Elon Musk, “rug pull” schemes where seemingly legitimate cryptocurrency companies disappear with consumers’ money, and “pump and dump” schemes where fraudsters drive up the price of worthless assets before selling out.

A separate Action Fraud report, published in April, estimated that £113m was lost to cryptocurrency fraud in 2020.


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