Due to Binance’s Refusal to Cooperate, FCA Cannot Audit the Company
Aug 26, 2021
The Monetary Conduct Authority of the United Kingdom has declared that it is “unsuccessful” in its supervision of Binance because the contentious cryptocurrency exchange has refused or been unable to respond to queries or provide data about its activities to the regulator.
Binance is the world's largest crypto exchange, but it's been in hot water with regulators around the world due to a lack of transparency in how the company is structured across its various locations of work, as well as its provision of regulated merchandise without proper authorization in some jurisdictions.
The FCA barred Binance's UK subsidiary, Binance Markets Restricted, from operating in the country in June, joining a chorus of regulators in Japan, Hong Kong, Italy, and elsewhere who have made similar decisions.
The FCA claimed in a supervisory discover dated August 25 that the UK entity had “refused” to reply to a number of questions regarding the company because of the way its Cayman Islands-incorporated group is organized, with locations all over the world and no clearly defined headquarters.
It also failed to respond to questions about the legal and regulatory status of certain products, such as digital stock tokens tied to the value of tradable companies like Tesla and Apple, or to provide the buying and selling names, capabilities, and names of closely-related executives for all international group entities, according to the regulator.
The MCA believes that the agency will not be able to be properly overseen based on [Binance Markets'] participation thus far, according to the find, which was originally published by the Financial Times. “This is of particular concern given the agency's involvement in a global organization that provides sophisticated and high-risk financial products that pose a significant risk to customers.”
Despite the prohibition, UK clients may still use Binance services to buy, sell, and manage cryptocurrencies that are not regulated by the FCA. The Financial Conduct Authority (FCA) projected in January that more than 2.3 million Britons had invested in cryptocurrencies.
The FCA's investigation also revealed some information on Binance's projected efficiency. According to its research, Binance's 24-hour spot buying and selling volumes in June were projected to be between $11 billion and $38 billion, with 316 cryptoassets supported and 1,130 purchasing and selling options. In the same month, 24-hour derivatives volumes were projected to be worth $129 billion.
“As the FCA has indicated, BML has completely complied with all elements of its requirements,” a Binance spokesman said. We then communicate with the FCA to settle any outstanding issues that may arise. We're committed to working with regulators and politicians to establish insurance policies that protect clients, foster innovation, and move our business forward as the bitcoin ecosystem develops and evolves.”
Binance CEO Changpeng ‘CZ' Zhao has indicated that the company aims to increase employment in its compliance section as part of a strategy to address regulatory concerns. Earlier this month, it named Greg Monahan, a former US Treasury jail investigator, as its international currency laundering reporting officer.
Following the regulatory decisions, a number of UK banks, including Barclays, Santander, Nationwide, and NatWest, have prohibited customers from sending money to Binance or altered their cryptocurrency policies.
“Binance has expanded quickly, and we haven't always gotten everything quite right, but we're learning and improving every day,” Zhao remarked last month.
“We aim to make clear and restate our commitment to working with authorities, as well as the fact that we are proactively employing more experts and putting in place more strategies and processes to protect our customers.”