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U.K. Regulators Surrender to Binance

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U.K. Regulators Surrender to Binance

  • United Kingdom Financial Conduct Authority concedes that it is neither able to effectively supervise or discipline Binance
  • Experience of the U.K. FCA underscores the challenges faced by regulators in policing a novel technology that by design allows it to circumvent national borders, restrictions and oversight

You can’t regulate what you can’t supervise, and you can’t supervise what you can’t see.

Which is why the United Kingdom’s Financial Conduct Authority or FCA announced that it is “not capable” of effectively supervising Binance’s U.K. arm.

In a June notice, that attracted little attention at the time, the FCA conceded that it had no ability to oversee, let alone discipline Binance, one of the world’s largest cryptocurrency exchanges that facilitates hundreds of billions of dollars’ worth of transactions every month.

According to the FCA notice, Binance’s U.K. affiliate had “failed to” respond to some of its allegedly basic queries, making it impossible to oversee the cryptocurrency juggernaut, which has no fixed headquarters yet offers services globally.

The concession by the FCA underscores the challenges facing not just regulators in the U.K., but globally, in tackling potential risks to consumers buying unregulated and complex financial products through agile cryptocurrency businesses, which have the capability of circumventing national banks, and monetary authorities.

Parallel financial systems are hardly new – from offshore private banks to over the counter or OTC trades in derivatives, and complicated mortgage-backed securities and swaps that set the scene for the 2008 Financial Crisis.

But because cryptocurrencies by their very nature allow borderless transactions and peer-to-peer transfers of value, authorities have a far harder time spotting illegal active or identifying systemically risky transactions.

And despite Binance’s CEO Changpeng Zhao or CZ’s public declarations to turn Binance into a compliant cryptocurrency exchange, working with regulators globally, the company (if one can call it that) has flipped the bird to the FCA so far.

According to the FCA, Binance declined to explain how it is organized, how U.K. residents use its products or even who runs its website.

While nominally domiciled in the Cayman Islands, Binance has thousands of employees globally, but no headquarters.

When the FCA demanded that Binance should state prominently it cannot undertake regulated business in the United Kingdom, the company buried an innocuous link to this boilerplate declaration somewhere on its homepage.

The FCA’s initial crackdown on Binance in the U.K. sparked off a string of warnings by regulators from Thailand to Japan, seeking to censure the cryptocurrency exchange.

But the experience of the FCA should be instructive that even as regulators globally seek wider powers to police the cryptocurrency space, the technology itself may allow users to circumvent that regulation altogether.

U.K. Regulators Surrender to Binance

The post U.K. Regulators Surrender to Binance appeared first on SuperCryptoNews.

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