Introduction

The Cyprus Securities and Exchange Commission (CySEC) has officially deregistered Binance off the country’s register of authorized digital asset service providers. The register monitors cryptoasset companies for compliance with the country’s anti-money laundering rules.

Reason for Deregistration

• The primary financial services regulator in Cyprus said the decision to strike the crypto giant’s local entity came as it remained inactive for a continuous period of six (6) months.

Binance’s Application to Withdraw

Binance, the world’s largest cryptocurrency exchange by traded volume, submitted an application to withdraw its operations from Cyprus back in June. At the time, the exchange said it undergoes a review process to deregister from the regulator in anticipation of the forthcoming Markets in Crypto Assets (MiCA) legislation by the European Union.

Binance’s Focus on Compliance

• By proactively seeking this rescission, Binance claims it wants to focus on meeting the requirements of the upcoming regulations.
• “We are working hard to prepare our business to be fully compliant with MiCA when it is implemented in the next 18 months. To that end, we have made the decision to pull back efforts in Cyprus to focus on our efforts on fewer regulated entities in the EU,” a Binance spokesperson said.

Timing of Deregistration Application

Binance submitted its deregistration application prior to being sued by the United States Securities and Exchange Commission (SEC). The spokesperson did not provide specific timing details. The SEC filed a lawsuit against Binance and Binance.US, alleging violations of securities laws.

Binance’s Class 3 Registration

Earlier in October, Binance Cyprus Limited was granted Class 3 registration which allows the world’s largest crypto ecosystem to offer spot, custodian, staking and card services. The Cypriot licensing requires the firm to adhere to strict financial standards under the MiFID II framework, including the segregation and protection of client funds, full transparency of its business operations and capital adequacy controls.

CySEC’s Efforts to Increase Oversight

The CySEC has been trying to increase oversight of cryptocurrencies and related assets by integrating EU anti-money-laundering rules into the Cypriot laws.

Requirements for Crypto Firms

A policy statement issued in 2021 sets out detailed requirements for crypto firms seeking registration in the regulator’s CASP register. This register is publicly accessible and includes information such as the crypto firm’s name, the legal form, its address and services. The policy also introduced a definition for crypto assets that slightly extends beyond its traditional legal status.