The world’s largest cryptocurrency exchange in terms of trading volume, Binance, faced huge outrage after many countries banned the company from carrying out any regulated activity. The news has become particularly important in the UK
The country’s financial watchdog, the Financial Conduct Authority (FCA), announced in June 2021 that Binance was not permitted to conduct any regulated activity without the prior consent of the FCA. The authority has not given any specific reason for the ban.
The FCA has also cautioned clients against investing in cryptoassets in general. The warning stated that most companies advertising and selling options to invest in crypto-related products are not regulated by the FCA. This means that if a client is having trouble investing in crypto assets, they will not be eligible for the Financial Services Compensation Program or Financial Mediation Service.
The authority also said that while it does not regulate crypto-assets like trading in Bitcoin or related products, it does regulate certain crypto-asset derivatives and crypto-assets considered to be securities. Only companies licensed by the FCA can advertise or sell such products in the UK
What is happening in other countries?
Besides the UK, other countries like Japan, China and Germany also impose bans on cryptocurrency trading or at least issue warnings to make customers wary of such investments. China and the United States were two of the first countries to impose similar bans and have had a significant impact on the market.
Japanese financial regulators have said Binance’s operations in the country are illegal and unauthorized by the government. Germany has also said it is considering fining the company for offering tokens linked to shares without prior approval.
China, the growing economic superpower, has also imposed bans prohibiting several financial institutions and payment companies from providing cryptocurrency-related services. China’s spokespersons, however, had a reason to justify the ban.
They said they were concerned about the cryptocurrency’s fluctuating prices. Speculative cryptocurrency trading, such as Bitcoin trading, and the risk it poses to the financial security of people and the economic order of the country are behind this decision.
With so many countries issuing warnings against Bitcoin trading and banning major crypto exchanges like Binance, what impact could this have on Bitcoin prices or crypto regulations in general?
The impact of repression
The crypto industry is largely unregulated. With the exception of a few companies that have tried to forge links with regulators, others like Binance are working outside of established regulations. Regulators have noticed these activities. Although most countries and their financial regulators are increasingly trying to introduce innovations in financial services, cryptocurrency trading is still seen as a risk.
The main risks include the lack of consumer protection and the illicit activity or money laundering that crypto can allow. Binance has come under close scrutiny by the FCA primarily because it has failed to meet the anti-money laundering requirements that an exchange is required to comply with.
With these new bans, Binance can still operate outside of these countries and customers can access Binance on its website. What changes is that Binance cannot advertise or promote itself in the UK as a regulated cryptocurrency exchange. To offer regulated services in the UK, the company would have to seek authorization from the FCA.
It also means that Binance’s plans to offer crypto trading services using European currency, pounds and euros, on an FCA-regulated platform will need to be reconsidered.
Following these new rules, the tech giant Google has also decided to only allow FCA-verified financial services to advertise on their platform in the UK. This is an effort to mitigate the risk of financial fraud on their platform, according to Google.
How does this affect Bitcoin trading?
With pushbacks from so many countries, popular cryptocurrencies like Bitcoin and Ether are expected to suffer. Bitcoin and Ether suffered the biggest single-day drop since March 2021, and the entire cryptocurrency industry lost nearly $ 1 trillion after China banned all financial institutions providing services. of cryptography.
Bitcoin prices have fallen nearly 30% to $ 30,066, while Ethereum fell to $ 1,850.
While the ban imposed by China had a huge impact on the crypto market, the FCA’s ban on Binance did not have much of an impact on Bitcoin prices.
The FCA ban still leaves it up to investors to decide whether they wish to trade crypto assets, having been warned of the risks apprehended by regulators. In China, however, the crackdown makes it more difficult for individuals to purchase cryptocurrencies using regular payment channels. Cryptocurrency cannot be exchanged for Yuan either, which makes it difficult for miners.
The impact on Bitcoin prices, however, was short-lived. Bitcoin quickly gained 6.8% and rose to $ 34,854.
Cryptocurrency advocates and supporters believe these brutal and strict regulatory measures taken by countries indicate that the market is maturing. They also believe that these measures could encourage companies to create more robust safety nets, which could attract attention in the future.
Cryptocurrency is still a relatively new concept for most people and institutions. It takes time for society as a whole to adjust to these changes, especially when it comes to money. These repressive measures may have a temporary duration impact on Bitcoin trading and prices, but as people get more familiar with the concept of crypto, it will be interesting to see how it gets adopted in the future.
Governments and cryptocurrency companies need to bring transparency to regulation. Governments need to define the regulations well so that companies know what they can and cannot do. But these regulations cannot be the same as those controlling ordinary currency. They need to be aligned with what cryptocurrency and blockchain technology stand for. The concept of completely decentralized exchanges with users having full control over their coins is what the crypto industry aims to achieve.