Explainer: Binance, the giant crypto exchange under regulatory scrutiny

Explainer: Binance, the giant crypto exchange under regulatory scrutiny

LONDON, July 1 (Reuters) – Britain’s financial watchdog has banned major cryptocurrency exchange Binance from conducting regulated business, the latest in a series of moves against the platform by authorities around the world whole.

Here are the answers to some key questions about Binance, one of the largest exchanges in the world, and what the latest regulatory measures mean.


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Transaction volumes in June were $662 billion, almost ten times compared to July 2020, according to data from CryptoCompare. In a single day in May, daily volumes hit $92 billion, US researcher Coin Metrics said.

Led by Canadian Changpeng Zhao, Binance offers a wide range of services to users around the world, from spot crypto trading and derivatives to tokenized versions of stocks.

It also runs an exchange that allows users to directly exchange with each other. Its own cryptocurrency, Binance Coin, is the fourth largest in the world.

Binance is gaining popularity in Britain, where its app was downloaded 1.8 million times in 2021, and 2.2 million times in total, according to mobile data company Sensor Tower.


It’s unclear.

Binance’s corporate structure is opaque, with its holding company largely registered in the Cayman Islands. A Binance spokesperson declined to comment on its location, saying it was “decentralized” and “works with a number of regulated entities around the world.”

Binance has amassed huge following across the globe, with channels on social media app Telegram for users in over 30 countries.


Yes – in Britain and elsewhere.

Britain’s Financial Conduct Authority (FCA) said last week that Binance’s UK arm cannot conduct any regulated activity, without saying why it took the action. Read more

Crypto trading is generally unregulated in Britain, although certain activities such as the offering of crypto derivatives do require authorisation.

Regulators, including the FCA, are increasingly concerned about the standard of anti-money laundering controls on crypto exchanges and the risks that crypto trading poses to consumers.

The Japanese regulator said last week that Binance was operating illegally in the country, while the German watchdog said in April that it faced possible fines for offering stock-linked tokens. In May, Bloomberg announced that Binance was under investigation by the US Department of Justice and the Internal Revenue Service. Read more

Still, national regulators often struggle to rein in crypto exchanges based elsewhere, lawyers have said.

“It’s very difficult,” said Simon Treacy, senior attorney at Linklaters. “(The FCA) doesn’t have jurisdiction over all of Binance’s operations, so they use the point where they have jurisdiction and put pressure on the company there.”

Binance’s spokesperson said that it takes its compliance obligations very seriously and is committed to meeting all regulatory requirements wherever it operates.


Its influence may be limited.

Beyond sounding a warning to investors, the FCA did all it could within its limited powers on an offshore exchange, experts say.

“At the moment, the method is to focus on the risks to UK investors of these services rather than to regulate them outright,” said Barney Reynolds, a solicitor at Shearman & Sterling.

UK investors can still access Binance through its main website, over which the FCA has no power.

Yet the FCA’s request that Binance seek its permission to offer regulated services means it would be an offense to suggest to investors that it was regulated in the UK.

Binance will also have to rethink plans announced last year to offer crypto trading services in pounds and euros on a UK-regulated platform.

Google said this week it would only allow entities authorized by the FCA to run ads for UK-based financial products on its website, after repeated calls from the FCA to crack down on online fraud .

Banks’ concerns about investment scams and fraud involving crypto exchanges may also impact Binance. Last week, UK-based Natwest Group (NWG.L) capped the daily amount customers can send to exchanges, including Binance. Read more

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Reporting by Tom Wilson and Huw Jones; Editing by Kirsten Donovan

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