Binance, a major cryptocurrency exchange, announced on Friday that it would shut down its futures and derivatives business in Europe, the platform’s latest effort to reduce its product offering as regulatory pressure mounts throughout the world.
With immediate effect, Binance users in Germany, Italy, and the Netherlands will be unable to establish new futures or derivatives products accounts, according to a statement on the exchange’s website.
During the global epidemic, bitcoin and other cryptocurrencies grew in popularity among retail investors, forcing regulators to strengthen their surveillance of trading platforms, despite the fact that most cryptocurrency trading is uncontrolled.
Regulators in the United Kingdom, Germany, Hong Kong, and Italy have increased pressure on Binance, one of the world’s top crypto exchanges by trading volume, due to concerns about consumer safety and the standard of anti-money laundering inspections at crypto exchanges.
“Binance is a very important market for the European region, and it is working hard to harmonise crypto rules, which is a good sign for the sector,” the exchange said on Twitter.
“We recognise that different local regulators may have different perspectives on Bitcoin, and we welcome the opportunity to have a healthy discussion about local legislation.”
“We recognise that various local regulators may have their own views on cryptocurrency, and we welcome the opportunity to engage in a productive debate about local regulations.”
Users in Germany, Italy, and the Netherlands will have 90 days from a later date to terminate any open derivatives holdings, according to Binance.
The German financial authority BaFin has declined to comment on Binance’s decision. Requests for comment from the Italian and Dutch regulators were not immediately returned.
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PRESSURE REGULATORY
Binance’s withdrawal from derivatives in Europe is the company’s most recent withdrawal from a specific crypto product.
On Friday, Malaysia’s securities regulator reprimanded Binance for illegally running a digital asset exchange in the nation, becoming the latest authority to do so. find out more
Financial regulators have more power to rein in crypto firms offering derivatives, according to Simon Treacy, a senior lawyer at Linklaters in London. Futures and other such products often fall under their purview. Spot cryptocurrency trading, on the other hand, is largely uncontrolled.
In the derivatives area, regulators have more leeway to respond quickly, he said. They are not required to wait for the legislative process to be completed before bringing derivatives into scope, as would be required to take action against spot trading.
On Tuesday, Binance CEO Changpeng Zhao stated that the exchange would seek a regulatory licence and build regional headquarters in order to enhance relations with regulators. find out more Binance has also discontinued cryptocurrency margin trading in the Australian dollar, euro, and pound sterling.
After regulators cracked down on the cryptocurrency exchange platform’s “stock tokens,” the exchange halted trading digital tokens linked to shares earlier this month. find out more
The decision, according to market participants, may add to broader concerns about the viability of cryptocurrency derivatives trading for individual investors.
Binance has pushed out large parts of the futures market in recent years; if their retreat from the business deepens, the medium-term consequences are unlikely to be good.