The FCA’s decision to ban Binance is a surprising new development for all those retail investors asking the question, “how do I buy a little bit of crypto, but as safely as possible?”
The question raises two points, the first being associated with market risk; the chance that price might go against you, and which can’t be avoided. Classic risk management protocols, such as only trading amounts you can afford to lose entirely, come into play there.
How to Find a Trusted Broker
The second risk is counterparty or operation risk – the risk that the broker or exchange you use isn’t legit. The move by the FCA, the UK’s regulatory authority, hammers home the concern that the crypto sector attracts its fair share of scammers. Announcing that the world’s biggest crypto exchange can’t conduct “any regulated activity” in the UK will cause many with crypto positions to wonder if their investment is secure.
Losing money on a bad position is something every trader needs to learn to manage. In addition, there is the very real and potentially soul-destroying risk for holders of crypto positions that even if they make the right calls, those staggering paper profits remain out of reach. There are few feelings worse than deciding to cash in on trading profits only to find the exchange being used is a fraud. This inevitably results in account holders realising they’ve lost their initial capital stake as well as any profit.
The bad news for Binance has resulted in the exchange tweeting an immediate response that involves statements that suggest the firm is taking the regulator head-on:
“BML is a separate legal entity and does not offer any products or services via the http://Binance.com website. (1/4) … Our relationship with our users has not changed. (3/4) … We are actively keeping abreast of changing policies, rules and laws in this new space. (4/4)”
This is a bold move by the exchange, and national regulators catch a lot of flak when they get things wrong. However, one of the golden rules is to respect their authority. Immediate responses from the public to Binance’s comments don’t bode well.
“Your statement goes against the FCA stating this affects the entire group and not just BML. Can you clarify this?”
Source: Leonardo Pizzaro
“Release my money asap! I’m contacting international law enforcement agencies.”
So Where Can You Trade Crypto Safely?
The crackdown on crypto trading reflects the regulator’s desire to clamp down on the risks it poses to individual investors. In January, a range of new rules came into force that limited the number of regulated brokers offering markets. The crypto instruments themselves are unregulated, which means trades in them have less regulatory protection than in regulated assets. There are, however, some regulated brokers offering markets in unleveraged crypto trading. Given the FCA’s move, it looks like more traders looking to get exposure to crypto will be heading to eToro.
If you want to know more about this topic or have been scammed by a fraudulent broker, please contact us at [email protected]
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