Binance rolls back futures and derivatives business in Hong Kong

abdelaziz Fathi

Binance, the world’s largest cryptocurrency exchange platform, is winding down its futures and derivatives product offerings in Hong Kong amid a growing crackdown by regulators.

binance

With immediate effect, new users from Hong Kong will no longer be able to open accounts with Binance to trade crypto derivatives. As for existing users, Binance said they will have a ‘90 days’ grace period’ to close their open positions. During the grace period, no new positions may be opened, Binance said on Friday.

The announcement comes barely a week after Binance decided to shut down its futures and derivatives business across Europe, starting in the Netherlands, Germany, and Italy. The influential exchange has come under increasing regulatory scrutiny in Europe amid concerns about compliance and protection for investors

Binance CEO Changpeng Zhao “CZ” indicated that the move to restrict access to derivatives products to Hong Kong users was ‘proactive’.

CZ previously revealed that he expects Binance to face heavy scrutiny in the future as the influential exchange is shifting from “a tech startup to a financial service.” He said that while announcing that the US arm of the global platform is considering an initial public offering (IPO) despite the ongoing regulatory crackdown.

Binance is facing a growing crackdown on multiple fronts and has been flagged by regulators in other jurisdictions before. Most recently, Malaysia’s regulator reprimanded the exchange and its chief executive for operating illegally in the country, despite a previous warning.

The legal notice specifically names Binance’s brands registered in the Cayman Islands, Lithuania, the UK, and Singapore. The exchange CEO Zhao Changpeng (CZ) was also mentioned by name to ensure that the SC’s directives are carried out.

Britain’s Financial Conduct Authority (FCA) also restricted the exchange from carrying out regulated activities in the UK. Separately, Brazil’s financial markets regulator, the Securities and Exchange Commission (CVM), barred Binance from offering Bitcoin futures contracts in the country.

Hong Kong regulators have been recently keen to create a comprehensive regulatory framework for cryptocurrency businesses as the SFC wishes to offer more robust investor protection.

Part of their proposed paradigm are plans to issue licenses to cryptocurrency platforms as the regulator’s mandate only covers assets that qualify as futures contracts or securities.

The SFC is also looking to examine whether exchanges should fall under their mandate and to see how well such platforms respond to its regulatory provisions.

Licenses could be granted to the crypto exchanges complying with the SFC’s existing requirements for Type 1 regulated activities (securities dealers) and Type 7 (ATS) under the virtual asset licensing framework in Hong Kong. They are required to put controls in place to ensure proper due diligence, suitable solicitation, and adequate risk disclosure.

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