Bybit Faces Regulatory Challenges in the UK, Set to Exit Ahead of New Marketing Rules
Bybit, one of the world’s largest crypto exchange operators, is preparing to withdraw from the United Kingdom due to upcoming marketing regulations set to take effect in just a few weeks. Ben Zhou, the co-founder and CEO of Bybit, cited the increasingly stringent regulatory environment as the driving force behind their decision.
“We do see regulation becoming more strict. Most likely, we’ll have to retreat in many countries. I think the UK – we’ll have to exit very soon. We recently exited France,” explained Zhou, acknowledging the global shift towards tighter crypto regulations.
The impending changes are primarily driven by the Financial Conduct Authority (FCA), the UK’s financial regulatory body. On October 8, 2023, the FCA will implement new rules designed to enhance transparency and accuracy in the marketing of cryptocurrency products. One key feature of these regulations is the introduction of a cooling-off period for first-time crypto investors.
While crypto derivative products have been prohibited in the UK since 2021, some exchanges, including Bybit, have continued to serve UK customers through a legal provision known as “reverse solicitation.” However, with the impending regulatory changes, the legality of this practice is in question.
“FCA has explicitly contacted all the major players – us, OKX, Binance, everyone – and asked what our plan is to deal with this new law. And the new law is that if you use English as a language, they will see you as trying to solicit their users, so you cannot claim that you are in reverse solicitation,” Zhou explained. “Everyone is in trouble. So everyone is thinking of plans for how to deal with this new law.”
For Bybit, the most probable outcome is a complete withdrawal from the UK market. Founded in 2018 as a derivatives-focused exchange, Bybit has expanded its services over the years, including spot trading. Nevertheless, the company’s roots in derivatives remain strong, with a significant 23% share of open interest across bitcoin futures, as reported by The Block Research’s data.
This decision underscores the challenges that crypto exchanges face as they navigate an evolving regulatory landscape worldwide. As governments and regulatory bodies seek to exert greater control over the crypto industry, exchanges are forced to adapt and make difficult choices to remain compliant.
The exit of Bybit from the UK serves as a stark reminder of the ongoing struggle between innovation and regulation within the cryptocurrency space. While the UK government aims to protect investors through stricter rules, the move may also hinder the growth of the crypto market within the country, potentially driving crypto enthusiasts and businesses elsewhere.
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