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Why Was Binance Banned in the U.K.?

Why Was Binance Banned in the U.K.?
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The crackdown on Binance may be just the beginning of increased regulation in the UK.

The UK authorities have banned the widely used international cryptocurrency exchange Binance from operating in the country.

In a recent statement, the Financial Conduct Authority (FCA) – the UK’s financial regulator – said: “Binance Markets Limited is not permitted to conduct any regulated activity in the UK.”

Binance will be required to display a clear warning to UK customers on its website. It is also prohibited from advertising its services in the United Kingdom

Binance Markets Limited is a subsidiary of the UK-based Binance Group, registered in the Cayman Islands.

Currently, the FCA does not regulate cryptocurrency exchanges operating in the UK, as a result, a spokesperson for Binance Group said that Britons will be able to continue trading as normal. The company argues that stock exchange services will not be affected because the website is not in the UK

However, deposits and withdrawals in GBP on the site are currently frozen. This may be because payment processors are under the jurisdiction of the Financial Conduct Authority (FCA), but the situation is not yet clear.

Why is the UK putting pressure on Binance

Binance is one of the largest cryptocurrency exchanges in the world. However, it has hit regulators in many countries recently because it has pushed the boundaries of the cryptocurrency services it offers.

Regulators in Japan warned this month that the company is not registered to operate there. Binance has pulled out of Ontario, Canada, following regulatory actions against other exchanges.

Binance has formed a subsidiary company in the United Kingdom as part of its efforts to become a cryptocurrency exchange registered in the country. The idea was to create something similar to Binance.US, a country specific site that complies with local regulations. However, she withdrew his application earlier this year.

The Financial Conduct Authority (FCA) is concerned on several fronts:

  1. Lack of control over cryptocurrency trading. The Financial Conduct Authority (FCA) has issued several warnings that investors may “lose all their money” if they invest in cryptocurrency. She is concerned about the high levels of volatility and believes that cryptocurrency exchanges are not transparent about the risks.
  2. Anti-money laundering regulations. British crypto firms have until next month to register with the Financial Conduct Authority (FCA) and comply with anti-money laundering requirements. The original January deadline had to be extended due to the large number of applications.
  3. Cryptographic derivatives. The Financial Conduct Authority (FCA) banned the trading of crypto-derivatives (provided by Binance) at the beginning of this year. She is concerned that cryptocurrencies are highly volatile and that derivatives trading (which allows investors to borrow to benefit from the amount they invest) is too risky for retail investors.
  4. Recent tokens for Binance Stock. In April, Binance released a new product called Stock Tokens, which are cryptocurrencies linked to the value of certain stocks like Apple or Microsoft. This blurs the lines between crypto tokens and company stocks and raises regulatory questions in many countries.

What does this mean for cryptocurrencies around the world?

Earlier this year, cryptocurrency prices fell dramatically due to the news that China may clamp down on all crypto services in the country. Other countries, including the United Kingdom and the United States, are studying how to regulate cryptocurrencies.

Some cryptocurrency exchanges have played a safe role and pride themselves on operating within the regulatory framework. Others, such as Binance, continue to take the act-first approach and seek forgiveness later.

Regulators want to give retail investors the same levels of protection they have when investing in stocks or opening a bank account. Governments want to protect their economies and currencies but find it difficult to answer, “What is cryptocurrency?”

Some cryptocurrencies are similar to stocks. Others are direct coins. Others branch out into lending and other forms of decentralized finance (DeFi). This presents a major problem for authorities who wish to avoid money laundering and deception.

Many countries are warning against over-regulating this booming market. A number of people are studying the benefits of launching their own government currencies, such as a digital dollar. This may include the blockchain technology that underpins most digital currencies, but with government support and the lack of volatility that we find in traditional currencies.

As one cryptocurrency CEO warned, we will undoubtedly see an increase in regulation in the coming months and years. This can help the cryptocurrency industry by removing some of the bad players and increasing consumer confidence. But as we’ve seen in China, it could also hurt the entire industry.

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