Bitfinex Announces Restrictions for UK Users: Is the Crypto Hub Dream Dead?

• The UK set out ambitions to become a “global crypto asset hub” in 2022.
• However, since then, new regulations from the Financial Conduct Authority (FCA) have soured the mood.
• Bitfinex has become the latest exchange to change or limit services to UK customers in response to new rules.

Cryptocurrency exchange Bitfinex is tightening restrictions on some of its UK-based customers in order to align with the country’s latest regulatory requirements. The changes, which take effect on January 10, will have an effect on both existing individual customers residing in the UK as well as existing corporate customers who do not qualify for exemptions.

The move is the latest blow to the UK’s stated ambition to become a ‘global crypto asset hub’.

Bitfinex Limits Services to UK Customers

Last week, Bitfinex said that, starting next Tuesday, it will no longer allow some UK account holders to make new deposits, open new positions, or increase their margin trading. These customers can still withdraw their funds or reduce existing exposures. However, the inability to add to their accounts represents a major blow.

Bitfinex was recently placed on a warning list by the UK’s Financial Conduct Authority (FCA) for promoting financial services without proper authorization. The FCA said that Bitfinex was “not authorized by us and may be targeting people in the UK.” It seems this slap on the wrist, along with the threat of further action, motivated Bitfinex to restrict services.

However, the move will not affect all UK-based customers. The cryptocurrency trading venue said exemptions would remain in place for corporate residents who qualify as high net worth companies, unincorporated associations, trusts or other eligible entities. These privileged organizations can continue enjoying Bitfinex’s full range of services.

Going forward, Bitfinex said that it would no longer be accepting applications for account verification from corporate UK residents unless they satisfy the exemptions. 

Individual UK-based customers have been banned from opening new accounts since November 1.

Exchanges Exit UK, Questioning Crypto Hub Dreams

This is not the first time a cryptocurrency exchange has responded to new UK regulations by limiting British customers. Last October, Binance announced restrictions because of new crypto advertising and marketing rules published by the FCA.

As of last week, Coinbase, Crypto.com, and Gemini now require UK users to complete risk assessments and financial knowledge questionnaires. This complies with UK rules that mandate clear communication of trading risks and responsible advertising by crypto companies. Failure to complete these tasks will restrict users from trading in their crypto accounts.

The new measures are raising questions about the UK’s stated ambitions to be a “crypto hub”—an official policy of the government since April 2022. Many companies are beginning to reconsider their position in the country in the face of new rules and regulations.

The country has yet to publish a tailored and comprehensive regulatory regime for digital assets similar to the EU’s Markets in Crypto-Assets Regulation (MiCA) legislation. Until then, the UK crypto industry is left with little but stated ambitions.

Concerns are growing that a bill may not pass Britain’s parliament before the upcoming general election this year.