Binance, the world’s largest cryptocurrency exchange by trading volume, has announced that it will comply with the new regulatory framework for crypto assets in the UK, despite its previous decision to withdraw its application for registration with the Financial Conduct Authority (FCA).

The FCA introduced new rules for crypto asset firms in January 2020, requiring them to register with the regulator and demonstrate compliance with anti-money laundering and counter-terrorist financing standards. The deadline for registration was initially set for January 2021, but was later extended to March 2022 due to the high number of applications and the complexity of the assessments.

Binance had applied for registration in June 2020, but withdrew its application in May 2021, citing its intention to pursue a full FCA-regulated UK entity under a different legal name. However, in June 2021, the FCA issued a consumer warning against Binance Markets Limited (BML), the UK entity owned by Binance Group, stating that it was not permitted to undertake any regulated activity in the UK. The FCA also clarified that its warning did not apply to Binance.com, the global platform operated by Binance Group from outside the UK.

Following the FCA’s warning, several UK banks and payment providers, including Barclays, Santander, NatWest and PayPal, suspended or restricted their customers’ access to Binance.com, citing regulatory uncertainty and customer protection concerns. Binance responded by saying that it was disappointed by these actions and that it was committed to working with regulators and stakeholders to ensure a safe and secure environment for its users.

In a blog post published on October 6, 2023, Binance said that it had decided to operate under the new FCA rules for crypto assets, and that it would re-apply for registration as soon as possible. Binance also said that it had made significant improvements to its compliance and risk management systems, and that it had hired several senior executives with regulatory and compliance experience to lead its UK operations.

Binance’s CEO Changpeng Zhao, also known as CZ, said in a statement: “We are fully aligned with the FCA’s goals of ensuring financial inclusion, market integrity, and consumer protection. We respect the FCA’s role in creating a level playing field for all participants in the UK’s digital asset industry, and we welcome the opportunity to re-engage with the FCA and demonstrate our commitment to operating under their supervision.”

The FCA regulates crypto businesses under different regimes, depending on the type of service or activity they provide:

Anti-Money Laundering/Counter-Terrorist Financing (AML/CTF): The FCA is the AML/CTF supervisor for crypto asset exchange providers and custodian wallet providers in the UK. This means that these firms have to comply with the Money Laundering Regulations 2017 (MLRs), which implement the EU’s Fifth Anti-Money Laundering Directive. The MLRs require these firms to register with the FCA, conduct customer due diligence, monitor transactions, report suspicious activity, and keep records.

Payment Services: The FCA is the payment services regulator for e-money issuers, e-money agents, and payment service providers in the UK. This means that these firms have to comply with the Payment Services Regulations 2017 (PSRs), which implement the EU’s Second Payment Services Directive. The PSRs require these firms to be authorized or registered by the FCA, have adequate capital and governance, safeguard customer funds, provide information and redress to customers, and follow conduct of business rules.

Financial Services and Markets Act 2000 (FSMA): The FCA is the financial services regulator for security token issuers and providers in the UK. This means that these firms have to comply with the FSMA and its secondary legislation, such as the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO) and the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (FPO). The FSMA and its secondary legislation require these firms to be authorized or exempt by the FCA, follow prudential and conduct of business rules, and adhere to disclosure and marketing standards.

Binance’s decision to comply with the FCA’s rules is seen as a positive sign for the UK’s crypto asset sector, which has been facing increased regulatory scrutiny and uncertainty in recent months. The FCA has warned that investing in crypto assets involves high risks and that consumers should be prepared to lose all their money. The FCA has also banned the sale of certain types of crypto derivatives to retail investors and has proposed extending the financial promotions regime to crypto assets.

Therefore, the FCA advises crypto consumers to be aware of the potential risks and benefits of using or investing in crypto assets or e-money, and to do their own research before making any decisions. However, some industry experts and advocates have argued that the UK’s regulatory approach is too restrictive and could stifle innovation and growth in the crypto space. They have called for a more balanced and proportionate framework that recognizes the potential benefits of crypto assets and supports their development in a safe and responsible manner.

Taiwan proposes special Crypto Law by end of November

Taiwan is moving forward with its plans to regulate the cryptocurrency industry, as a lawmaker revealed that a draft bill could be ready by the end of November. The proposed legislation, which would be the first of its kind in Asia, aims to provide a clear and comprehensive framework for the development and innovation of digital assets in the island nation.

Taiwan is one of the few countries in Asia that has not banned or restricted cryptocurrency trading. However, the island nation is not taking a laissez-faire approach either. Recently, the Financial Supervisory Commission (FSC), the main financial regulator in Taiwan, issued new guidelines for domestic and foreign crypto platforms operating in the country. The guidelines aim to enhance customer protection, prevent money laundering, and foster a healthy and compliant crypto industry.

According to legislator Jason Hsu, who is leading the initiative, the bill will cover various aspects of the crypto space, such as taxation, consumer protection, anti-money laundering, and licensing. Hsu said that he hopes to present the draft to the parliament before the end of the current session, which ends on November 30. The previous guidelines, which were announced on September 26, 2023, covers four main aspects:

Separation and custody of assets: Crypto platforms must keep customer funds separate from their own assets and entrust them to a third-party custodian. They must also conduct regular audits and disclose the results to the public.

Review standards for listing and delisting: Crypto platforms must establish clear and transparent criteria for listing and delisting virtual assets. They must also monitor the performance and risk of the listed assets and inform customers of any changes or incidents.

Information disclosure: Crypto platforms must disclose relevant information to customers, such as fees, transaction rules, risk warnings, dispute resolution mechanisms, and contact details. They must also report any security breaches, hacking incidents, or abnormal transactions to the FSC and customers as soon as possible.

Anti-money laundering compliance: Crypto platforms must register with the FSC and follow the anti-money laundering regulations applicable to financial institutions. They must also verify the identity of customers, keep transaction records, and report any suspicious activities to the authorities.

The guidelines also apply to offshore crypto platforms that target Taiwanese customers or solicit business in Taiwan. These platforms must register with the FSC and comply with the same rules as domestic platforms. Otherwise, they will be prohibited from operating in Taiwan.

Hsu, who is known as the “crypto congressman” for his support of blockchain and fintech, said that he has been working closely with industry stakeholders, regulators, and academics to craft a balanced and forward-looking bill that would foster a healthy and competitive crypto ecosystem in Taiwan.

He said that the new bill will not only provide legal certainty and clarity for crypto businesses and investors, but also encourage innovation and entrepreneurship in the field. He added that Taiwan has the potential to become a regional hub for crypto and blockchain, as it has a strong talent pool, a vibrant startup scene, and a supportive government.

The FSC has said that it will cooperate with other regulators and law enforcement agencies to monitor and crack down on unregistered offshore crypto platforms. It will also publish a list of registered platforms on its website for public reference.

The FSC has said that the new guidelines are not meant to stifle innovation or hinder the development of the crypto industry in Taiwan. Rather, they are intended to provide legitimacy, oversight, and a clear growth path for the crypto industry, ensuring compliance and public trust.

The FSC has also encouraged domestic crypto platforms to form an industry association and develop self-regulatory rules based on the guidelines. Currently, nine platforms have established a working group for this purpose. The FSC has said that it will support and supervise the self-regulatory efforts of the industry.

Additionally, the Ministry of Economic Affairs is planning to incorporate a crypto business category in its commercial group classification. This will help crypto businesses register and operate legally in Taiwan. Taiwan is one of the few countries in Asia that has not banned or restricted cryptocurrency trading. However, it is also not as liberal or progressive as some other jurisdictions, such as Singapore or Switzerland.

Currently, there are no regulations or rulings concerning the purchase, sale, or taxation of cryptocurrencies in Taiwan. However, cryptocurrencies that are unconnected to any nation are not accepted by the Central Bank of the Republic of China (Taiwan) (CBC) as currencies. The CBC has also warned of the risks and volatility of cryptocurrencies and advised the public to exercise caution.

The FSC has said that it will continue to monitor the global trends and developments of crypto regulation and adjust its policies accordingly. It has also said that it will cooperate with other regulators and stakeholders to establish a comprehensive and balanced regulatory framework for crypto assets in Taiwan.

Taiwan is taking a proactive and pragmatic approach to crypto regulation. The new guidelines issued by the FSC are designed to protect customers, prevent money laundering, and foster a healthy and compliant crypto industry. The guidelines also apply to offshore crypto platforms that target Taiwanese customers or solicit business in Taiwan.

The FSC has said that it will support and supervise the self-regulatory efforts of the domestic crypto industry and cooperate with other regulators and stakeholders to establish a comprehensive and balanced regulatory framework for crypto assets in Taiwan. Hsu also said that he hopes that the bill will set an example for other Asian countries that are still grappling with how to regulate the crypto industry. Hsu said that he believes that Taiwan can play a leading role in shaping the future of digital assets in the region and beyond.