Within 24 hours of its new cryptoasset marketing regime going live, the Financial Conduct Authority (FCA) flagged 146 issues about crypto promotions breaking the rules. A week later, even global-scale exchanges are now feeling the impact of the new regime as Binance has had to stop accepting new UK users.
Binance was allowed to promote its services in the UK as it was engaged with a firm authorised by the FCA: Rebuildingsociety.com (REBS). Two days following the launch of the UK regulator’s regime, REBS was no longer able to approve financial promotions of any crypto institutions (including Binance) and had to withdraw any existing approved promotions.
For the time being, Binance is currently looking for a new approver. Commenting on this Cuautemoc Weber, co-founder and CEO of Gateway.fm, the decentralised blockchain infra/node provider said: “The timeline for Binance to find a new FCA-authorised approver is uncertain. It really depends on the exchange’s ability to navigate the evolving regulatory landscape and meet the FCA’s compliance requirements. This may involve extensive due diligence and regulatory negotiations, making the duration difficult to predict.”
Although it is no longer going to be accepting new UK customers, existing ones will be allowed to continue to use Binance’s current offering. However, any new features that are released will be withheld from current consumers until a new approver is found.
The UK customer impact
One of the FCA’s biggest goals from the new crypto-asset marketing regime is to keep customers safe. While the FCA has informed organisations that it wants to bring in a 24-hour cooling period which enables users to revoke an investment, Binance is also doing its part to ensure consumer safety.
“The key is a balanced approach that combines regulatory oversight with education to foster a more informed and responsible trading environment.” – Peter Wood
In its announcement, the crypto asset exchange reiterated its risk warning, encouraging its users to learn more about the risks associated with crypto through an easily absorbable bullet point list. Additionally, it also provides a breakdown of different terminology and different coins consumers should be wary of before investing.
Peter Wood, chief technical officer at Spectrum Search, the web3 recruitment company, discussed the impact the crypto exchange’s announcement would have saying: “Binance’s decision to halt new registrations and impose restrictions on existing UK users could have a domino effect on the broader UK crypto market.
“As one of the world’s largest crypto exchanges, Binance’s pullback might instil a sense of caution among investors and stakeholders. This could slow down the rate of new crypto adoption in the UK, at least in the short term.
“However, I see an opportunity here for local and regional crypto platforms to fill the void. Given my experience in scaling a licensed cryptocurrency trading platform, I can attest that regulatory compliance offers a competitive advantage. Investors are more likely to trust platforms that adhere to local financial regulations. So, this could be a boon for UK-based crypto platforms that are fully compliant with FCA guidelines, offering them a chance to capture market share.”
While there is potential for UK-based crypto platforms, the crypto market’s inherent global nature makes it difficult to regulate locally. As a result, Wood points out that some investors may look to find loopholes. “Investors could still bypass restrictions using VPNs or flock to other non-compliant platforms. So while it’s a step in the right direction, it’s not a complete solution. The key is a balanced approach that combines regulatory oversight with education to foster a more informed and responsible trading environment.”
Sharing a similar sentiment, James L. Koutoulas CEO at Typhon Captial Management, the trading firm, says: “It will hurt UK crypto further in a continuation of the woes caused by over regulation. Like alcohol prohibition in the 1920s, banning something that people really want never works- it just pushes the demand into the gray and black markets similar to how many US consumers lost billions in FTX due to the US being overdue in passing sensible crypto laws and regulations.
“The FCA rules against retail participation may make it so that Binance exits the space until/if the rule is rolled back.”
Signs of hope
Nonetheless, Binance’s desire to remain compliant is a good thing for crypto as highlighted by Graeme Moore, head of tokenization, Polymesh Association, the security token blockchain. “The UK has been making positive strides recently with crypto, particularly with a16z setting up its first non-US office there, and Rishi Sunak making thoughtful comments on the industry and its future.
“However, at the same time we have banks closing legitimate accounts related to crypto, and now Binance pausing new accounts in the UK. This recent announcement by Binance will hopefully not have any long-lasting negative impact, since it’s simply related to advertising rules, and remaining above board with the FCA.