Crypto exchange Binance has an Australian financial services license canceled by Asic | Binance

Australia’s financial regulator has canceled the local financial services license of the world’s largest cryptocurrency exchange, Binance.

Earlier this year, the Australian Securities and Investments Commission (Asic) found that Binance had wrongly classified hundreds of retail clients as wholesale investors.

Asic chairman Joe Longo said the distinction was important because retail customers have access to more consumer protections under Australian law, including the right to dispute resolution.

Binance’s Australia Financial Services (AFS) license only allows it to offer derivative products to sophisticated investors, rather than retail clients.

“It is very important that AFS licensees classify retail and wholesale customers in accordance with the law,” Longo said.

“Retail customers trading 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 Ombudsman Service.

“Our targeted review of these cases is ongoing, including a focus on the extent of consumer harm.”

Dr Angel Zhong, an associate professor of finance at RMIT, said in November that many investors do not know what AFSLs cover and may assume it will cover cryptocurrency exchanges, giving the company more credibility.

“I think a lot of people have this impression that if [the company has] an AFSL … then [they’re] protected, but in fact they are not really fully protected, she said.

“[An] AFSL gives you the impression, especially to the general public, that it is legal, but what is legal is not the cryptocurrency, it is the general financial product that they otherwise provide.”

As of April 14, Binance customers will not be able to increase derivative positions or open new positions. The exchange must close any remaining open positions by 21 April. Binance can remain a member of the Australian Financial Conduct Authority until April 8, 2024.

Asic has repeatedly warned that many crypto products and services are not regulated and has urged crypto users to be prepared to lose funds they invest.

“As we have said before, Asic supports a regulatory framework for crypto with a focus on consumer protection and market integrity. The final decision on the regulatory settings is one for the government,” Longo said.

Binance has operated in Australia for many years, but the now-cancelled AFSL was with Oztures Trading, a company they acquired last year.

Asic bolstered its cryptocurrency team last year as it looked to regulate more digital assets by classifying them as financial products, a move that would make it harder to sell them to Australians.

Binance and its CEO, Changpeng Zhao, are being sued in the US by commodity market regulators in a complaint alleging that the defendants committed “intentional evasion of US law”.

The Commodity Futures Trading Commission (CFTC) said it had filed a civil enforcement action in federal court in Chicago, charging Zhao and three entities that operate the Binance platform with numerous violations of the Commodity Exchange Act and CFTC regulations. The complaint also charges Binance’s former chief compliance officer, Samuel Lim, with helping Binance commit the violations.

The complaint alleges that Binance has grown its US operations despite publicly stating its intention to block US customers from accessing the platform.

The allegations in the complaint include an allegation that even after announcing US restrictions, Binance told its most valuable US customers how to avoid the compliance checks.