UPDATE: On 17 February 2022, Binance announced that GBP deposits and withdrawals had resumed. You can read Binance's own announcement here and a commentary here, including the fact that the FCA still remains concerned but is unable to stop this. Please note the below article was originally publish on 28 June 2021 and has been left unchanged.
In the last 24 hours, the media has reported headlines such as “Binance banned in City watchdog crackdown”.
You’d be forgiven for thinking that a major fraud and crime had taken place.
The reality? Very far from it. In this article, we’re going to break down the crazy media misreporting of the FCA’s relationship with Binance and explain to you what is really going on.
The stark truth
There are two truths underneath the headlines:
- You are still able to buy and sell crypto perfectly safely from the UK on Binance.
- If you already hold coins on Binance, nothing has changed.
Why the uproar then?
The short answer is that crypto gets a lot of clicks.
The FCA has indeed issued a warning on its website in relation to Binance. More on that later. But that warning bears very little correlation with the headlines that we are seeing in the media.
In our post-truth world, journalists seem increasingly happy to write first and think later. If journalists actually bothered to look at what is going on, they would see how misleading their headlines are.
Unfortunately this is at best a case of journalists being ill-informed and, at worst, a case of journalists misleading consumers.
Many of the articles do actually state the plain truth in the body of the article. Take for example the BBC, who led with:
Binance: Financial watchdog FCA bans crypto-currency exchange
And then in the body of the article for those who bother to read it, they say:
“Binance’s existing crypto exchange is not UK-based so despite the FCA ruling, there will be no impact on UK residents who use the website to purchase and sell crypto-currencies.”
The two statements don’t marry up. It’s a clear case of fearmongering and clickbait.
So what is actually happening?
The bottom line is that if you are buying and selling coins as a UK resident on Binance, you are unaffected.
The FCA published this warning against Binance. This is the root of the all the headlines. But if you actually read the notice, what it’s saying is that Binance is not allowed to undertake regulated activity in the UK.
The natural question should be – what is regulated activity? Those are activities which, if you undertake, you need prior authorisation from the FCA as an authorised firm. Such activities typically include things like selling shares or enabling the selling of shares (like your share broker), selling insurance, mortgages and other similar financial activity.
The FCA acknowledge however that crypto is NOT regulated. So in order to operate a crypto exchange, you don’t need to be regulated. What is regulated, however, are crypto derivatives. Binance aren’t allowed to offer those to UK residents. But as Muslims, derivatives are generally a no-go anyway so this shouldn’t affect us too much.
Why is the FCA doing this?
You might wonder why the FCA are bothering with all this. I guess there are a few key reasons:
- The purpose of the FCA is essentially to protect retail investors like you and me. Savvy people might be comfortable navigating around an unregulated broker, but many people aren’t. This kind of warning probably puts off the right sort of people.
- The FCA doesn’t want the average Joe getting suckered into investments that aren’t appropriate for them. We can argue about the ethics of this, but at heart it is fair to see why. Crypto can be a wild journey if you have the wrong mindset.
Media misreporting and lessons
The FCA’s action here isn’t unreasonable by any stretch. What has gone badly wrong is the media reporting.
It is unforgivable for so many mainstream media outlets to consistently be reporting such misleading headlines. We saw the same thing with the whole “Ronaldo caused the Coca Cola share price to drop” headlines – all nonsense if you actually look past the headline.
I’ve taken some key lessons which I wanted to share:
- Always go to the source. Anyone who bothered to click on the relevant FCA page will have probably seen straight away that the headlines didn’t match the source. As a side note, I wonder how many hits the relevant FCA page got compared to the BBC article.
- Take some time to actually understand what is going on. Here, you’d need some financial and regulatory know-how. I appreciate not everyone has that. But instead of then just going off what the headlines say, seek someone out who you know and trust who can help you interpret a piece of news for what it actually is.
- Many journalists write purely for clicks and many journalists will copy and jump on a bandwagon. They don’t truly understand the underlying story. Let’s not assume for a second that any headline or story in a respected publication is gospel.
- When it comes to investing, it pays to be well-informed. You should not invest on hype or speculation. Because when things change, you will panic and make rash decisions.
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