Crypto Currency Updates
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How do you run an online business that has facilitated $ 13.5 million in sales for 13.5 million customers over the past year but has no global headquarters? According to the British Financial Conduct Authority, which was finally published last week, it is not very easy the reasons for banning the local arm of Binance, the world’s largest cryptocurrency exchange, to undertake any regulated activity. While the public nature of the ban was a warning to retail investors, it also highlighted how regulators are struggling to oversee the crypto market. More needs to be done to help.
What especially upset the watchdog was Binance’s unwillingness to explain, as part of money laundering checks, the overarching group structure and who ultimately stands behind binance.com. Being open with the regulator is an FCA principle of doing business. In addition, a basic requirement for FCA oversight is a basic requirement to know exactly who is behind a business and to link to other entities. This is the condition that the regulator considered that Binance UK is currently unable to comply with.
The result appears to be a major shrug through the crypto exchange. His website did as the watchdog said and included a warning about his arm in the UK. But that does not stop UK customers from using the site to buy and sell cryptocurrencies, which in any case remain largely unregulated by the FCA.
But even if Binance does not care much for the FCA, the rest of the regulated financial community can possibly do so. Although the point of the cryptosphere is that it exists outside the established financial system, the idea that it can operate without the current system is naive. Customers still want to exchange their cryptocurrency in pounds or dollars, and this usually requires dealing with a traditional bank, just too aware of its obligations against money laundering. The FCA action was enough to prompt lenders such as HSBC and Barclays to announce prevents UK customers from sending money to Binance. Some hedge funds too stood back.
Binance’s detachment is also a long-term tactical mistake, and not just in the UK: it square earlier this year to Germany’s watchdog. It may feel less pungent when it comes to the U.S. authorities, who have reportedly been investigating and who have much more severe fines at their disposal. Regulators, especially those in the UK and the US, do talk to each other. Being in the bad books of one means that others may be more suspicious.
At the moment, there is not much more in the FCA’s arsenal other than to warn the 2.3 million Britons who trade cryptocurrencies must be prepared to lose their shirts. Many armchair dealers, whose ranks swelled during locks, seem careless: risk is part of the excitement. Whether the FCA should have the capacity to do more remains an open question, and a question that should have been addressed by a crypto task force set up by the Treasury in 2018. It needs to publish another detailed policy. The authorities must quickly articulate how they see their future powers.
The US was more straightforward. Gary Gensler, head of the Securities and Exchange Commission, says he wants more tools at his disposal. Although there is disagreement about how to approach the rise of crypto, consensus builds on the need to direct exchanges, where the cryptosphere and the real world meet. As the biggest exchange, Binance should build a dialogue with its future watchdogs, and not oppose it. The founder of the group, Changpeng “CZ” Zhao, tweeted Thursday, apparently a suggestion of nothing: ‘Solve problems, move forward’. He must take his own advice.
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