Another banking giant breaks off relations with Binance, Barclays blocks UK customers from transferring funds to Binance

Barclays has cut off funds transfer channels between British customers and Binance after the Financial Conduct Authority (FCA) said last month that the digital asset exchange Binance is not authorized to conduct cryptocurrency business in the UK.

Barclays notified its customers on Monday that it had decided to stop payments to Binance via credit/debit cards, with immediate effect, in order to keep customers’ funds safe until further notice. The bank said: “This action does not affect customers’ withdrawals from Binance. This decision was made after the FCA issued a warning to consumers.”

The ban comes nearly two weeks after the FCA said Binance Markets Limited was not authorized to conduct crypto business in the country. The UK regulator FCA issued a formal warning to Binance last month, prohibiting it from engaging in regulated financial activities such as arranging traditional investment trades and stating that it was not authorized to conduct cryptocurrency business in the UK.

Binance has at times struggled to reconcile its compliance functions with its sprawling businesses, which include trading in digital currencies, options, savings accounts and stock tokens, according to several people familiar with its business model.

An executive at a payment company that helped Binance connect with traditional financial markets before severing ties with it revealed in an interview with the Financial Times that Binance often "talks a lot about rules in terms of anti-money laundering and KYC (know your customer)", but has always been "resistant" to investing human resources in compliance issues.

Binance did not immediately comment on the Barclays blockade, saying only that market suggestions that it lacked adequate compliance capabilities were "categorically untrue" and that it took its "legal obligations" very seriously.

Binance in dire straits

The UK is the latest in a growing list of countries that have accused Binance of not having the authority to conduct regulated activities.

On June 25, Japan’s Financial Services Agency (FSA) issued a second warning to the exchange, stating that it was still operating without registration in the country.

On June 26, Binance announced that it would no longer serve users in Ontario after the Ontario Securities Commission began taking legal action against unregistered exchanges.

Last week, the Thai Securities and Exchange Commission (SEC) filed criminal charges against Binance for allegedly operating without a license in Thailand.

On Friday, the Cayman Islands Monetary Authority (CIMA) said Binance does not have permission from the regulator to operate a cryptocurrency exchange business in or within the Cayman Islands, despite media reports that it is incorporated in the territory.

Binance currently does not have a physical headquarters around the world, but only connects with the traditional financial market through a series of global branches. In Europe, its branch has reached deals with British payment providers including Checkout.com and Clear Junction, which allows fiat currencies to flow easily in and out of its huge trading platform.

Fraud and money laundering are the "thorns in the eye" of regulators

Regulators around the world have focused their attention on monitoring the financial passage of money between cryptocurrencies and the traditional financial system, placing banks at the heart of protecting consumers from fraud and preventing money laundering.

The focus on Binance has led to new moves by banks to review their clients’ money records with exchanges. Only five cryptocurrency firms have successfully registered with the FCA to receive anti-money laundering supervision, which is required to operate crypto asset businesses in the UK. Dozens of companies are currently awaiting FCA approval.

According to the FCA, about 2.3 million people in the UK hold cryptocurrencies, and the vast majority use offshore exchanges such as Binance to trade. These non-UK platforms are generally not required to register with the FCA, even if they have UK customers, which increases the difficulty of bank audits.

HSBC said last week that it does not comment on individual cryptocurrency exchanges but is "closely monitoring developments in these markets and regulatory changes." Lloyds Bank said it does not allow credit card payments for cryptocurrency transactions and will review all current transactions using a "robust fraud monitoring program," which also applies to Binance.

NatWest Bank said it had cut off payment access to a handful of crypto asset firms after “high risk of fraud” and reduced daily limits for customers to send funds to crypto exchanges, including Binance. Santander Bank said it was “reviewing” issues regarding “payments to unregulated cryptocurrency exchanges.”