Here’s why the UK’s FCA is not impressed with EQONEX’s agreement with Bifinity

• The FCA says the agreement granted Bifinity certain contractual rights over Eqonex
• The UK financial markets regulator insists it retains powers to suspend an unfit firm's crypoasset registration

The UK's Financial Conduct Authority yesterday sent out a note indicating that it is still keeping a close eye on Binance. The message came on the heels of Binance's subsidiary pay tech firm Bifinity completing a strategic agreement with FCA-regulated EQONEX Limited.

Binance launched payment tech company Bifinity yesterday, noting that EQONEX, the first publicly listed digital asset firm in the US, would receive a $36 million convertible loan as part of the agreement.

Further, the cooperation would also give Bifinity the right to appoint the CEO, CFO, and Chief Legal Officer of EQONEX, from within Bifinity. It would also get two seats on the EQONEX board.

The UK's financial watchdog is worried that via Bifinity's action to advance the convertible loan to EQONEX, the exchange could gain control over the firm due to contractual rights.

In fact, the regulator feels that Bifinity only completed the agreement to benefit from EQONEX's digital custodial offering, Digivault – which is FCA-regulated under the money laundering regulations.

"As a result of the transaction, individuals and entities that are part of the Binance Group may have become beneficial owners of Digivault for the purposes of the MLRs," the regulator said in a statement. 

Binance's financial products are complex and high risk

While the FCA admitted that it did not have the powers to assess the 'transaction' before it was completed, it said that it still holds reservations on Binance, stemming from past concerns.

The watchdog explained that Binance Markets Limited is the single entity under the Binance umbrella regulated in the UK but "for a limited set of activities." The firm is also required to strictly operate only with written consent from the FCA.

"This requirement was put in place because, in the FCA's view, Binance Markets is not capable of being effectively supervised. This is particularly concerning in the context of Binance Markets' membership of the global Binance group, which offers complex and high-risk financial products posing a significant risk to consumers," the regulatory authority explained.

Consequently, the regulator sounded a warning that it holds the right to revoke the registration of crypto businesses or their beneficial owners if it deems them unfit.

"The FCA also has powers to suspend or cancel a firm's crypto asset registration on a number of grounds, including where a firm has not complied with obligations under the Money Laundering Regulations," the regulator penned.