Binance Lists Ontario As A 'Restricted Jurisdiction'

June 28, 2021 04:00 PM
Crypto Story of the Day

Crypto Story of the Day




Crypto was on balance higher this morning while ETH was outperforming in the Top 20. Spot volumes were about 70% of their 30-day average.

Crypto Story of the Day

On Friday, Binance announced that it has designated Ontario a “restricted Jurisdiction.” The move preceded a notice from the UK’s Financial Conduct Authority (FCA) which stated that Binance “must not...carry out any regulated activities for which” it lacks permission.

Binance’s Friday announcement stated that the venue’s terms of service had been updated to include Ontario in a list of restricted jurisdictions, effective June 26. Ontario residents using the platform have until December 31 to close out active positions. 

This follows the Ontario Securities Commission’s March publishing of “Guidance for Crypto-Asset Trading Platforms: Compliance with Regulatory Requirements.” The guidance gave crypto exchanges an April 19 deadline to contact the regulator in order to “discuss how to bring their operations as a dealer or marketplace into compliance.”

Following the release, the OSC took action against Poloniex, KuCoin, and ByBit for failing to contact Canadian regulators and bring their venues within provincial laws by the April deadline. 

On Saturday, the FCA said in a statement that Binance is “not permitted to undertake any regulated activity in the UK.” The statement added that “Binance Group appears to be offering UK customers a range of products and services via a website,” Binance was also ordered to preserve data related to UK users. 

Binance responded that the FCA statement is related to Binance Markets Limited (BML), “...a separate legal entity” which “does not offer any products or services via the website.” According to Binance, the FCA’s notice “has no direct impact on the services provided on”

In April, the Financial Times reported that the FCA was reviewing whether Binance’s decision to offer trading in equities was in line with securities rules. In May, Bloomberg reported that Binance was under investigation by the U.S. Justice Department and IRS. Officials focusing on money laundering and tax offenses were said to be a part of the investigation. 

Earlier this month, CFTC Commissioner Dan Berkovitz said DeFi venues offering derivatives aren’t legal and that “we should not permit DeFi to become an unregulated shadow financial market.”

Global regulators have made it clear that crypto businesses would be allowed to develop, but on national governments’ terms. This effort is beginning to take form in practice: Canadian regulators, for example, have provided trading venues a path towards compliance, and have taken action against venues that haven’t taken this path. The implications of such an approach are fragmented national crypto markets with traders in one region typically unable to access venues in another. 

In Canada this scenario is largely playing out. Domestic traders are able to access fewer and fewer offshore venues, but continue to access venues that have made efforts towards local compliance, like CoinSquare and Coinbase. This fragmentation will benefit traders operating out of jurisdictions that allow for access to liquidity across regions. These traders will exploit various arb opportunities that will persist across regional trading venues.

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