LONDON/FRANKFURT (July 30): Major cryptocurrency exchange Binance said on Friday that it would wind down its futures and derivatives business across Europe, the latest move by the platform to dial back its product range as pressure grows from regulators across the world.
Binance users in Germany, Italy and the Netherlands will be unable to open new futures or derivatives products accounts with immediate effect, the exchange said in a statement on its website.
Bitcoin and other cryptocurrencies have surged in popularity among retail investors during the global pandemic, prompting regulators to put trading platforms under increased scrutiny even though most cryptocurrency trading is unregulated.
Regulators, including in Britain, Germany, Hong Kong and Italy, worried about consumer protection and the standard of anti-money laundering checks at crypto exchanges, have ratcheted up pressure on Binance, one of the world's largest crypto exchanges by trading volumes.
"The European region is a very important market for Binance, and it is taking proactive steps towards harmonising crypto regulations, which is a positive sign for the industry," the exchange said on Twitter.
"We understand that many regulators at local levels may have their own positions on crypto, and we welcome the opportunity to engage in a constructive dialogue on local requirements."
Users in Germany, Italy and the Netherlands will, from a date to be announced later, have 90 days to close any open derivatives positions, Binance said.
Germany's regulator BaFin declined to comment on Binance's move. Italian and Dutch regulators did not immediately respond to requests for comment.
Binance's exit from derivatives in Europe is its latest exit from a specific crypto product.
Malaysia's securities regulator became the latest watchdog to target Binance on Friday, reprimanding it for illegally operating a digital asset exchange in the country.
UK researcher CryptoCompare said in June Binance was the largest derivatives exchange globally, with volumes of US$1.7 trillion, down around 30% from a month earlier.
Simon Treacy, senior lawyer at Linklaters in London, said financial watchdogs have greater scope to rein in crypto firms offering derivatives as futures and other such products typically fall into their scope. Cryptocurrency spot trading, in contrast, remains mostly unregulated.
"The regulators have more scope to take swift action in the derivatives space," he said. "They don't have to wait for the legislative process to unfurl in order to bring derivatives into scope — that is what would have to happen to take action against spot trading."
Binance CEO Changpeng Zhao said on Tuesday that he wanted to improve relations with regulators, and said the exchange would seek their approval and establish regional headquarters. Binance has also stopped offering cryptocurrency margin trading involving the Australian dollar, euro and sterling.
Earlier this month, the exchange stopped selling digital tokens linked to shares, after regulators cracked down on the cryptocurrency exchange platform's "stock tokens".
Market players said the move may contribute to wider concerns about the future of cryptocurrency derivatives trading for retail players.
"A huge amount of money in crypto markets is floating around exclusively because of the existence and availability of such products," said Joseph Edwards of Enigma Securities, a cryptocurrency broker in London.
"Binance have crowded out large sections of the derivatives market over the last couple of years – if their retreat from said market deepens, the medium-term impact is unlikely to be positive."