Belgium’s Financial Services and Markets Authority Ordered Binance to Cease All Virtual Currency Services

Belgium’s Financial Services and Markets Authority Ordered Binance to Cease All Virtual Currency Services

The Belgium Financial Services and Markets Authority (FSMA) has ordered major Cryptocurrency Exchange Binance to stop offering Crypto Exchange and Custody wallet services with immediate effect.

The FSMA has noted that Binance was offering and providing exchange services in Belgium between virtual currencies and legal currencies, as well as custody wallet services, from countries that were not members of the European Economic Area.

FSMA stated that, “Persons or firms governed by the law of a country that is not a member of the European Economic Area are prohibited from offering or providing, within Belgium, by way of a professional activity – even if supplementary or ancillary – exchange services between virtual currencies and legal currencies or custody wallet services.”

Failure to comply with this prohibition is subject to criminal sanctions pursuant to Article 136 of the Belgian Law on the prevention of money laundering and terrorist financing, added the regulator.

The regulator was of the view that by offering such services in Belgium from countries that are not members of the European Economic Area, Binance violated the prohibition.

Therefore, by way of its decision dated 23 June 2023, the FSMA decided to order Binance to cease, with immediate effect, offering or providing any exchange services in Belgium between virtual currencies and legal currencies, as well as custody wallet services.

Binance has not disputed the fact that it offered such services in Belgium.

“On the basis of the general terms and conditions that apply to Belgian clients of the Binance.com platform, these services appeared to be provided by Binance Operators that are not otherwise identified in the said contractual terms and conditions. There are apparently 27 such companies involved in the operational and/or technical aspects of the provision of these services, of which 19 appear to be based outside the European Economic Area,” noted the regulator.

Although Binance had been contacted several times for information, the latter had not been able to demonstrate the legal standard that legal entities must meet in order for them to provide services of the aforementioned type in Belgium. In fact, the legal entities that are providing these services in Belgium are based in the European Economic Area and have the necessary domestic legal authority to do so.

The regulator highlighted that by entities, it included those entities which effectively perform (with their own funds) exchange operations between virtual currencies and legal currencies and entities that act as legal depositaries for digital assets/keys of Belgian clients.

It was concluded that, in spite of the opportunities offered to Binance on several occasions, the latter had failed to demonstrate, with due documentation and proof, that the exchange services between virtual currencies and legal currencies and the custody wallet services that it offered and provided within Belgium were carried out by means of a legal entity governed by the law of another member state of the European Economic Area that was duly authorized by its home member state to carry out these activities, including within Belgium.

In addition to the order to cease their activities in Belgium immediately, the FSMA demanded that Binance must take immediate measures, after contacting their clients and taking into account any instructions the latter may give, to return to the Belgian clients in question all cryptographic keys and/or all virtual currencies that Binance hold for their account, or to transfer these to, entities governed by the law of an EEA member state and duly authorized by their domestic law to carry out such activities, including within Belgium.

The regulator asserted that Binance must take every precaution that may be useful to guarantee the security of such transfers.