The Financial Conduct Authority has warned that Binance is not allowed to offer regulated services in the UK, one day after the Japanese financial regulator said the crypto exchange is not registered to operate in Japan.

The UK financial watchdog said in a consumer warning on Saturday that Binance Markets Limited, a UK entity that is part of Cayman-incorporated Binance Group, is not allowed to undertake any regulated activities without the prior written consent of the FCA.

In addition, no other Binance entity was authorised, registered or licensed to conduct regulated activity in the UK.

Binance is currently the largest crypto exchange in the world. In May, the exchange carried out $1.5 trillion of spot trades and handled a trading volume of $2.46 trillion in crypto derivatives, according to a report by CryptoCompare.

The FCA does not regulate cryptocurrencies like bitcoin or ether, but the regulator has authority over cryptoasset derivatives such as futures or options and certain digital tokens that are considered securities.

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Binance Markets Limited had applied to offer digital asset services under the FCA’s cryptocurrency registration regime but pulled the application on 17 May, following intensive engagement from the FCA, the regulator confirmed.

The approval process largely focusses on a firm’s anti-money laundering regime.

The FCA warned consumers to be wary of online and social media ads promising high returns on crypto assets or related products.

The regulator noted that Binance Group appears to be offering UK customers a range of products and services via a website, Binance.com.

Binance said in a series of tweets that it takes “a collaborative approach in working with regulators and we take our compliance obligations very seriously”.

The notice issued by the FCA would have no direct impact on the services provided by the Binance.com website, because Binance Markets Limited is a separate entity.

British consumers can therefore still access services offered by Binance in other countries, as well as unregulated activities such as cryptocurrency trading.

However, in a notice, the FCA ordered Binance to prominently display by Wednesday on its website and apps that Binance Markets Limited is not allowed to undertake regulated activity in the UK and to stop any advertising.

Regulatory intervention in global crypto markets

The FCA’s move can be seen as part of a wider trend of regulatory intervention in the crypto markets.

On Friday, Japan’s Financial Services Agency warned for the second time since 2018 that Binance is not allowed to do business in Japan. Binance responded that it does not hold crypto exchange operations in the country nor actively solicits Japanese users.

On Saturday, Binance announced that it closed its business in Ontario, Canada, days after the province’s regulator filed an action against crypto exchange Bybit for allegedly violating securities laws.

In May, Bloomberg reported that Binance is under investigation in the US by the Department of Justice and the Internal Revenue Service.

And in April, Germany’s financial regulator BaFin warned investors that Binance was violating securities laws by offering stock token trading without issuing a securities prospectus, which outlines details about the issuer and terms and conditions.

In the Cayman Islands, digital asset services are regulated by the Virtual Asset Service Providers Act. VASPs had to register with the Cayman Islands Monetary Authority by 31 Jan. 2021. The second phase of the implementation of the legislation, which includes licensing and prudential supervision, was expected to come into force this month.

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