Why Crypto Exchange Binance Is Restricting U.K. Derivatives Traders’ Access

Why Crypto Exchange Binance Is Restricting U.K. Derivatives Traders’ Access

Binance is aiming to comply with United Kingdom’s policies and push for the approval of its crypto-related operations. Several UK retail investors were surprise after their access to derivaties was quickly cut off after delivering required information on the platform.

“We want to continue to establish a presence in the UK and serve UK users in a fully licensed and fully compliant manner,” were CZ words in an interview earlier this month. Now, Binance had something to say to its UK users: “To enable us to comply with UK financial regulations, we require you to . . . provide additional information”.

The announcement was delivered through private email to UK customers only. “This information will help us to determine whether your access to these products is permitted under local regulatory requirements or will be restricted,” it said.

“Binance is committed to full compliance, globally. This is a proactive measure to ensure that our product offering is welcomed by users and local regulators.” a spokesperson explained to Coindesk. The platform clarified that “users will only be able to close, reduce and/or redeem positions.”

For derivatives, users can top up their margin balance to prevent margin calls and liquidations. Other products and platform functions on Binance will not be affected,

UK Binance users registered prior to Dececember 14th, 2021 have until February 14th, 2022, to answer a pop-up form that will ask them wether they are private investors. Confirming so will immediately restrict their access to derivaties, some users reported. The platform said there are several options for users to categorize themselves.

Behind This Crypto Derivatives Block

Derivatives’ price is tied to the value of underlying assets, so investors are essentially betting on price movements –rather than owning the virtual asset itself– and this has been widely describe as a high-risk activity.

UK’s Financial Conduct Authority (FCA) banned the sale of all cryptocurrency derivatives (such as options, futures or contracts for difference) for the country’s retail customers at the beginning of 2021. They claimed derivates could cause serious harm to investors because of the volatility in price movements and “no reliable basis for valuation”.

This cuts the UK access to crypto products and sets the country a step back in a competitive and evolving financial eviroment. Investors, however, can opt to purchase derivatives through offshore accounts to avoid the strict regulations, so the policy doesn’t really work to “protect” them.

Similarly, the FCA sent a strong warning to Binance Markets Limited last June saying that they are “not permitted to undertake any regulated activity in the UK” as the Binance Group doesn’t hold “any form of U.K. authorization, registration or license to conduct regulated activity in the U.K.”

To this, the platform replied via Twitter that “The FCA UK notice has no direct impact on the services provided on Binance.com” since “BML is a separate legal entity and does not offer any products or services” on the website nor had it launched its “UK business”.

Binance claimed their relationship or arrangements with users had no changed as they could still use their products and services, and noted that they take their “compliance obligations very seriously”.

However, regulators around the worlds have aggresively pressured the company this year and they now want to push back and comply with UK financial regulations so the can operate in the country.

Earlier this month, Binance chief executive Changpeng Zhao told The Telegraph that they are looking to reapply for FCA authorisation. “We’re making a number of very substantial changes in organizational structures, product offerings, our internal processes, and the way we work with regulators.”, said CZ.

So changes were indeed expected, but UK traders were surprised by how fast it happened. A Twitter user said he was “expecting a longer journey / more questions” and thought he could “stop the process” at some point, but “it was just one question without any submission confirmation.”

The user suggested others to not fill in the required information before the deadline to not get their access immediately limited.


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