The City regulator has issued a warning to cryptocurrency exchange Binance after it announced a convertible loan offering.
The crypto exchange has said it will advance a $36m (£27.4m) deal through Bifinity, a payments arm entity it set up, to back the owner of a London digital asset custody group, Eqonex.
Bifinity is the new legal name of an entity formerly called Binance UAB, which is part of the wider Binance Group.
Bifinity has said it that it has acquired some specific contractual rights over Eqonex, the parent company of Digivault, a cryptoasset business registered under the Financial Conduct Authority (FCA) under money laundering regulations.
The watchdog said as a result of the deal, individuals and entities that are part of the Binance Group may have become beneficial owners of Digivault for the purposes of money laundering regulations.
The FCA said it did not have powers to assess the fitness and propriety of the new beneficial owners or the change in control before the deal was completed, however it had previously published information about our concerns about Binance.
The Binance Group is made up of Binance Markets, which is regulated by the FCA for a limited set of activities while other entities in the group do not have any form of UK authorisation, registration or licence to conduct regulated activity here.
The FCA said that Binance Markets is not allowed to conduct any regulated activities without the written consent of the watchdog, because the FCA believes the firm is “not capable of being effectively supervised”.
The regulator said this is “particularly concerning” as Binance Markets is part of the global Binance group, which offers complex and high-risk financial products posing a significant risk to consumers.
The FCA said it can take action to suspend or cancel the registration of a cryptoasset business if it is not satisfied the firm or its owner is “fit and proper” and has powers to suspend or cancel a firm’s cryptoasset registration on a number of grounds, such as if the company has not followed money laundering regulations.
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“Until outstanding issues are addressed, the FCA’s concerns about Binance Markets Limited remain, including those highlighted in the supervisory notice of June 2021,” the regulator said.