Binance Markets has been warned by the Financial Conduct Authority of the United Kingdom for partnering up with Binance’s payment company Bifinity and investment firm Eqonex.
It was reiterated by the FCA in a Monday statement that Binance Markets Limited cannot conduct certain cryptocurrency-related activities in the United Kingdom without prior approval due to previous concerns that it was incapable of “effective supervision” and that its products posed “significant risks” for investors. Financial watchdog says recently announced partnership between Bifinity and Eqonex might spook U.K. regulators.
According to the FCA, the partnership between Bifinity and Eqonex effectively meant that under money laundering regulations in the United Kingdom, certain individuals and entities that are part of the Binance Group may now be considered “beneficial owners” of Digivault, Diginex’s U.K. subsidiary and the custody solution of Eqonex. The financial watchdog said it “did not have powers to assess the fitness and propriety” of Binance Group’s entities before the partnership, but has previously warned the public about its concerns with the crypto firm.
As part of its strategic partnership with Eqonex, Bifinity agreed to provide a $36 million convertible loan aimed at expanding the companies’ products, including Digivault. According to the FCA, the loan grants Bifinity “specific contractual rights” over Eqonex, likely implying the agreement may allow a Binance Group company — in this case, Bifinity — to conduct regulated crypto activities in the U.K. through Eqonex’s connection to Digivault — going against a June 2021 notice from the regulator to cease operations.
“The FCA can take steps to suspend or cancel the registration of a cryptoasset business if it is not satisfied the firm or its beneficial owner is fit and proper,” said the regulator. “The FCA also has powers to suspend or cancel a firm’s cryptoasset registration on a number of grounds, including where a firm has not complied with obligations under the Money Laundering Regulations.”
We are aware of recent statements made by Eqonex Limited and the Binance Group confirming that an entity called Bifinity will advance a US$36 million convertible loan to EQONEX. https://t.co/EV7keSHRpa
— Financial Conduct Authority (@TheFCA) March 7, 2022
Crypto exchange Binance said in June 2021 that the FCA notice would have “no direct impact” on its services, stating that Binance Markets was “a separate legal entity.” Binance CEO Changpeng Zhao later announced in December that the exchange was planning to apply for an FCA license and hoped to operate in the U.K. within 18 months.
To become a registered crypto firm in the United Kingdom, companies need to operate in accordance with the country’s Anti-Money Laundering and Combating the Financing of Terrorism regulations. Cointelegraph reported that as of February, 32 companies have received FCA approval as registered crypto asset service providers out of roughly 200 that applied.