The financial watchdog has admitted it was “not capable” of regulating Binance after the cryptocurrency firm refused to provide basic information about its operations.
The Financial Conduct Authority barred its UK arm from operating in Britain in June and issued a further warning on Wednesday about Binance’s operations.
Binance allows consumers to buy and sell hundreds of digital coins as well as making highly leveraged bets. Traders exchanged an estimated $38bn every 24 hours and made derivatives bets of up to $129bn.
The company was founded in China and later domiciled in the Cayman Islands. Last year, it moved to set up in Britain, Binance Markets Limited, after buying out a FCA-registered UK business. It applied to become a UK registered company, but withdrew the application in May.
However, the FCA said that earlier this year Binance “refused” to reveal information about its parent company, corporate structure or the legal body behind the Binance website.
The regulator said in a supervisory notice issued on Wednesday: “The FCA considers that firm’s responses have been incomplete and have included direct refusals to provide information.”
The FCA added it believed Binance’s “complex and high risk” cryptocurrency products posed “a significant risk to consumers”.
Binance chief executive Changpeng Zhao speaking in malta in 2018
The watchdog ordered Binance to stop offering any services or adverts in the UK in June.
However, it is still able to interact with British consumers through its Binance.com site that is not part of its UK division. Its site includes a small notice confirming it is not a UK entity.
The watchdog said: “The FCA considers that the firm is not capable of being effectively supervised.”
The admission reveals the limits and challenges facing regulators when tackling cryptocurrency giants, many of which are registered offshore with vague ownership records and opaque management structures.
Despite facing censure from regulators and bans by banks around the world, Binance has continued trading, although its chief executive, Changpeng Zhao Zhao, said in July he was considering stepping down.
The price of Bitcoin has recovered after regulatory crackdowns warnings earlier this year and is up by a third to about $48,450.
Binance dismissed the FCA’s queries about its ownership and corporate structure: “We do not consider these questions to be appropriate, or in any way relevant.”
A Binance spokesman said: “As noted by the FCA, Binance Markets Limited has fully complied with all aspects of its requirements. We continue to engage with the FCA to resolve any outstanding issues that may exist.”