Crypto Traders and Coin Prices Face New Challenge as Binance Gives up its FCA Licence

• Binance Markets Limited (BML) has requested its FCA licence be revoked.
• The move goes against Binance’s stated intention to gain greater UK regulatory approval.
• The licensing issue extends beyond the ‘security of funds’ and could impact the price of coins.

A recent move by Binance to scale back the regulatory licensing of its UK operations should serve as a warning to crypto traders. Not only because trading unregulated instruments is inherently risky, but making it harder or less attractive for buyers to enter a market stifles demand and puts pressure on prices too.

The red flag which points to the direction the crypto industry is taking is the request by Binance Markets Limited (BML), the UK subsidiary of the global crypto exchange, to cancel its FCA licence. As the FCA stated, as of 30th May 2023, “the firm is no longer authorised by the FCA. No other entity in the Binance Group holds any form of UK authorisation or registration to conduct regulated business in the UK.”

Binance has described the deregulation of the BML entity as an “administrative process” that “has no impact on Binance’s future plans”. They point to BML having been dormant and having never conducted any type of regulated business in the UK. But the BML entity offered a foothold in a wider campaign to gain greater approval from the UK’s top financial regulator.

Binance’s Sub-Regional Manager for Growth in the UK and Europe, Ilir Laro, explained the move as being associated with good housekeeping. The FCA takes a dim view of firms that hold licenses but don’t use them; however, the wider context points to increased pressure on crypto platforms and prices.

The move is even more alarming because Binance, earlier in May, had expressed a desire to scale up its UK operations. Speaking at the Financial Times’ Crypto and Digital Assets Summit, Binance’s Chief Strategy Officer, Patrick Hillmann, stated that other entities of the Binance group were looking to be regulated in the UK. That move was, in turn, triggered by a clamp-down by US regulators on crypto platforms making the UK at that time appear to be a better alternative.

The platforms can still rely on “reverse solicitation”, the process which explains investors approaching the platform, rather than the other way around. But the hard-core section of the market, which actively seeks out crypto, can, to some extent, be assumed to be already holding positions. The moves in terms of regulatory licences instead make it harder for a groundswell of more mainstream investors to buy into the market. If that happens, the classic forces of supply and demand will exert their influence on coins.

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About the author: Justin Freeman

Justin is an active trader with more than 20-years’ industry experience of working for big banks and hedge funds. He has an inside knowledge of how the financial markets work, thanks to roles including trader on a $750m Event-Arbitrage desk and CRO and COO of hedge funds running a variety of strategies. From stat-arb and trend-following CTA to fixed-income relative value. Firm’s he has worked at include big banks like Citi, and prominent hedge funds including D. E. Shaw and Millennium Capital Management.

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