Major cryptocurrency exchange Binance intends to stop opening new accounts for trading cryptocurrency derivatives in Hong Kong as it seeks to introduce stricter compliance policies.
Note that this comes a week after Binance closed derivatives trading offers for three European countries; Germany, Italy and the Netherlands – in the near future, restrictions will extend to other European countries.
Now users of their Hong Kong are under the restrictions. Thus, Binance will be the first major cryptocurrency exchange to restrict access to derivatives for Hong Kong users.
Changpeng Zhao (CZ), CEO of the platform, posted on his Twitter profile about the new restrictions. As he reports, the rule takes effect immediately. New users from Hong Kong will not be able to open Binance accounts to trade derivatives. It is currently unknown for existing users in Hong Kong when the restrictions will take effect. However, after this date is announced; they will have three months to close their positions in cryptocurrency futures, options, leveraged tokens and margin products offered by Binance.
Binance also recently pulled out of trading tokenized stocks around the world amid global regulatory pressure.
Why is exchange imposing restrictions on its users?
Increased pressure from regulators from around the world forced the exchange to make certain concessions. For example, the Hong Kong Securities and Futures Commission recently noted that the platform is not licensed to carry out cryptocurrency-related activities in the region.
China and Hong Kong’s national security laws introduced last year have prompted many multinational companies to reconsider their commitments to Chinese territory.
For example, the Securities and Futures Commission (SFC) of Hong Kong has published rules defining a new regulatory framework for virtual asset trading platforms. The SFC will only issue licenses to platform operators that are able to comply with strict regulatory standards. These standards are comparable to those that apply to licensed securities brokers and automated trading platforms. These include additional requirements to address the risks associated with cryptoassets.
Binance is also facing similar challenges with regulators in Japan, Ontario, and the Cayman Islands. The UK, Malta and Italy have banned cryptocurrency exchanges from providing services to their citizens. In addition, major UK banks have stopped working with Binance.
Binance takes a regulatory path
Binance CEO Changpeng Zhao commented in an open letter that the close attention of regulators means the maturation of the crypto industry. He admitted that the Binance team “doesn’t always get things right”. However, as an exchange spokesman previously reported; the company takes its compliance obligations very seriously and is committed to complying with all regulatory requirements wherever it operates.
In his Twitter, the CEO of CZ stated bluntly that his platform is currently on the way of regulation.
CEO Changpeng Zhao said Binance will take a more proactive stance on regulatory compliance, moving away from a reactive approach to compliance in favor of a proactive approach. He stressed that restrictions on Hong Kong residents are just one of many measures.