On April 7th, 2023, news broke out that the Australian Securities and Investments Commission (ASIC) had canceled Binance Derviates Australia’s t/as Oztures Trading Pty Ltd Australian Financial Services Licence (AFSL). Binance is one of the largest cryptocurrency exchanges in the world, and this news is likely to have a significant impact on its operations.
The ASIC’s decision to cancel Binance’s Derivatives AFSL comes after the regulator issued a warning to Binance in March 2023. ‘ASIC has been conducting a targeted review of Binance financial services business in Australia, including its classification of retail and wholesale clients. On 29 March 2023, ASIC issued a notice of hearing under s915C of the Corporations Act 2001 to consider whether ASIC should cancel or suspend the AFS licence held by Oztures Trading Pty Ltd.’ – Per Asic Statement. It is important to note that this is not the entity that trades spot cryptocurrency in Australia for Binance and is completely separate despite what some media outlets are reporting.
The cancellation of Binance’s AFSL means that the Oztures Trading Pty Ltd is no longer authorized to operate in Australia, and it must cease all its activities immediately. This includes trading, providing financial advice, and issuing financial products to Australian customers. Any breach of the cancellation order could result in legal action against Oztures Trading.
ASIC Chair Joe Longo said, “It is critically important that AFS licensees classify retail and wholesale clients in accordance with the law. Retail clients trading in crypto derivatives are afforded important rights and consumer protections under financial services laws in Australia, including access to external dispute resolution through the Australian Financial Complaints Authority.
“Our targeted review of these matters is ongoing, including focus on the extent of consumer harms,” said Mr Longo.
ASIC’s decision to cancel Oztures Trading AFSL is not surprising, given the regulator’s strict approach to regulating cryptocurrency exchanges in Australia. The ASIC has been actively monitoring cryptocurrency exchanges operating in the country and has taken action against several exchanges in the past for non-compliance with the regulations.
Binance has been in the news for regulatory issues in other countries as well. In June 2021, the UK’s Financial Conduct Authority (FCA) issued a warning to Binance, stating that the exchange was not authorised to operate in the UK. In response, Binance announced that it would wind down its operations in the country.
In the US, the Commodity Futures Trading Commission (CFTC) is reportedly investigating Binance for possible violations of derivatives trading rules. The CFTC is also said to be investigating whether Binance allowed US customers to trade on its platform, which would be a violation of US securities laws.
The cancellation of Binance’s derivates AFSL is likely to have a small impact on Binance’s Australian operations and is part of a larger proactive measure by ASIC to start reducing customers exposure to risk post FTX. As post FTX collapse the question amongst industry insiders around how FTX was able to obtain an AFSL and the confidence this provided the consumer when dealing with them.
“I think many have this impression that if [the company has] an AFSL … then [they’re] protected, but in fact they’re not really fully protected,” she said. “[An] AFSL gives you the impression, especially for the general public, that it is legal, but what is legal is not the cryptocurrency, it is the general financial product they are otherwise providing.” Dr Angel Zhou Mentioned to the Guardian regarding FTX’s ability to acquire an AFSL.
Binance has just released an official statement regarding the cancellation of its AFSL in Australia via their twitter account. The exchange has been active on social media, stating that it is working with regulators to ensure compliance with the regulations in all the countries where it operates.
The cancellation of Binance’s AFSL in Australia is a blow to the exchange’s operations. It is a reminder that regulators are closely monitoring cryptocurrency exchanges and will take action against those that fail to comply with the regulations. It remains to be seen how Binance will respond to this setback and refocus their position within the Australian market.
ASIC continues to take action to disrupt and deter harm and misconduct within its jurisdiction:
- On 15 December 2022, ASIC commenced civil penalty proceedings in the Federal Court against Finder Wallet Pty Ltd for alleged unlicenced conduct and inadequate risk disclosure in relation to the Finder Earn product
- On 23 November 2022, ASIC commenced civil penalty proceedings in the Federal Court against Block Earner for unlicensed conduct in relation to its crypto-asset based products.
- On 25 October 2022, ASIC commenced civil penalty proceedings in the Federal Court against BPS Financial for alleged misleading statements and unlicenced conduct in relation to the crypto-asset “Qoin”.
As per ASIC’s statement it is important to note that this is clearly related only to Binance Australia’s derivatives operations where many news sources are reporting it impacting across their entire Australian operations which is incorrect. To read ASIC’s statement in full click here.
