Binance curbs UK trader access to risky crypto derivatives

Binance has moved to restrict UK customer access to crypto derivatives after its chief executive said the exchange plans to renew its push for regulatory approval to operate in the country.

The crypto exchange, which clashed with the Financial Conduct Authority earlier this year, sent notices to UK customers on Tuesday requiring them to provide additional information to continue to access derivatives and other features on the platform.

The FCA this year banned offering crypto derivatives to retail investors. But global exchanges such as Binance have still been able to offer these services to customers in the UK through offshore websites, despite the national watchdog’s ban.

“To enable us to comply with UK financial regulations, we require you to . . . provide additional information”, said the Binance notice to customers, first reported by Coindesk.

“This information will help us to determine whether your access to [certain] products is permitted under local regulatory requirements or will be restricted.” 

UK customers registered on Binance before December 14 have until mid-February to answer questions to determine whether they can maintain access to derivatives, according to the notice.

A copy of the user questionnaire, provided by one Binance user, asked users to report whether they were a wealthy, overseas or professional trader. Sophisticated traders can still use crypto derivatives under the UK rules. But the exchange said “most customers” would fall into none of those categories.

The limits on its offering mark the latest concession by Binance following a year of sustained pressure from regulators in jurisdictions around the world.

The message referred to futures, options and some other leveraged products as services that could be restricted.

Binance confirmed the messages had been sent. “This is a requirement to comply with local regulations. Binance is committed to full compliance, globally,” the group said.

Derivatives products and the practice of lending users money to amplify their trades have been at the centre of several regulators’ concerns over Binance and other crypto exchanges, since these speculative strategies can swiftly expose retail investors to severe losses. They also add to volatility across the broader market, industry executives say.

Binance chief executive Changpeng Zhao earlier this month told the Daily Telegraph the company planned to reapply for FCA authorisation to operate as a crypto company in the UK. The regulator in June ordered Binance to stop all regulated activities in the country and imposed stringent requirements in a high-profile “consumer warning”. 

Binance Markets Limited, one of the exchange’s UK affiliates, withdrew its application to the FCA prior to the warning.

The exchange has sought to set up crypto operations in several financial hubs but has faced strong pushback from regulators over questions about the group’s policies and procedures to protect consumers. The exchange on Monday said it would close its crypto bourse in Singapore and withdraw its regulatory application in the city state, following a rebuke from the local regulator in September.

Crypto investors in many jurisdictions can access Binance’s offshore exchange, which offers spot and derivatives trading, among other services, even if the group does not have operations in their country of residence. However, the group has set up affiliates around the world to gain better access to traditional payments networks.

In July, the exchange announced it would “wind down” its lucrative derivatives business in Europe, where it has also faced regulatory scrutiny, and lower the amount of money retail traders can borrow on the platform to amplify their bets.