Binance.com is one of the largest digital asset exchanges in the world – but is still unlicensed. To certain fiat money payment services Binance refers to Binance UAB, a subsidiary in Vilnius, Lithuania. Is that enough?
The Bank of Lithuania, which is the supervisory authoritiy for financial market participants in Lithuania, issued a warning in July 2021 to the public, that Binance is not a licensed entity in Lithuania. Therefore, Binance is not allowed to offer services regarding futures and options which are regarded as financial instruments in Lithuania. The activity of Virtual Currency Exchange Operators and Depository Virtual Currency Wallet Operators, however, is not regulated in Lithuania; there is only a mandatory requirement to inform the manager of the Register of Legal Entities no later than within 5 working days from the start or termination of such activity. This obligation is merely to ensure compliance with Anti-Money Laundering Rules.
German regulator, BaFin, has a different approach to Crypto Asset Custodians and treats crypto assets as financial instruments respectively investment assets unless these are mere utility tokens without investment character. Therefore, an ICO will require – in most cases – a prospectus authorised by BaFin. In this context, BaFin already issued a warning to Binance´s German subsidiary Binance GmbH & Co. KG in Spring 2021. The public offer of security tokens is illegal in Germany without prospectus.
Binance.com now directs its German customers from Binance.com/de to Binance.com/en in English language. The trading of futures and options is suspended for German customers – as it is in Lithuania. This „solution“ is unsatisfactory for both BaFin that has to deal with a public offering in Germany that is part of permanent German media coverage but on the surface not addressed to German customers and Binance that faces lower attraction to German customers due to language limitations and restricted services.
It seems clear that Binance as global crypto exchange operator and custodian requires a global strategy. With regard to Europe the looming MiCA might provide for a clear path to regulatory compliance. The path might start in Ireland and reach other European states by means of passporting. Until then (and beyond, if MiCA allows for a stricter national regime), Binance carries the risk to be further prosecuted by BaFin and other national regulatory authorities for its offer.
