Binance has been quick to praise the latest plans to regulate cryptoassets in the UK. In response to the economic and finance ministry’s proposals, the cryptocurrency exchange said it “looks forward to contributing to the process… [and is] enthusiastic about the core design principles mentioned”. But is Binance just seeking to reassure users after a string of allegations and bad press?
Regulatory Intervention Following A Turbulent Year
HM Treasury released its latest plans to legislate the crypto industry on 1 February 2023. The UK is taking a phased approach, starting with a regime that will facilitate the regulation of fiat-backed stablecoins that enable payments, building on announcements made in 2022. Phase two will focus on a broader range of activities, including crypto trading.
Ultimately, the UK government plans to crack down on lending through leverage, issuance, payment, and exchange. Crypto exchanges, such as Binance, will also face tougher requirements on defining admission requirements and disclosures, plus their use of promotions.
A Warm Reception From Binance
Binance emailed its UK customers this week to make clear that they are for the effective regulation of cryptoassets not against it. The industry’s largest exchange commented: “to ensure that the benefits of crypto are realised while minimising the risks, effective regulation is necessary.”
In a LinkedIn post, Binance CEO, Changpeng Zhao added: “Such regulation can provide certainty and a safe space for innovation, as well as establishing industry trust and long-term growth.”
Zhao also emphasized his hope that legislation would align with the Financial Stability Board (FSB)’s recommendations that “the regulation should be coordinated, consistent, comprehensive and proportionate to the nature, scale and complexity of risks.”
Actions Speak Louder Than Words
Whilst it’s clear the marketing department at Binance is working hard to get across the right message, proactive communications do not detract from the allegations levelled at the firm of late.
It recently came to light that Binance transferred almost $350 million for Bitzlato, a Russian-owned crypto exchange that has been shut down and its owner arrested for breaching money laundering rules. The concerning revelation raised serious questions about Binance’s supposed commitments to tackling money laundering.
But even more troubling following the collapse of FTX, is that Binance recently conceded it had commingled up to $1.3B in client assets with reserve assets. At the very least this is a damning indictment of the firm’s internal accounting procedures while cynics are arguing this could be the unravelling of the world’s leading cryptocurrency exchange.
So Binance may be making all the right noises in response to the UK’s latest regulatory proposals, but it still has some way to go to convince users that their funds are safe.
In the meantime, many retail investors are turning to established brokers that offer CFD crypto trading, a derivative vehicle that allows users to go long or short on cryptocurrencies without taking ownership of the underlying token or having to store it on a central exchange.