Britain’s financial watchdog said on Monday it lacked the power to assess the “fitness and propriety” of new beneficial owners of digital asset custodian Digivault, after an arm of crypto exchange Binance launched a tie-up with Digivault’s parent.

Crypto assets firm Eqonex, which owns Digivault, and the new payments arm of Binance, the world’s biggest crypto exchange, earlier said in a statement that the partnership would focus on “leveraging” Digivault, which is regulated by Britain’s Financial Conduct Authority.

Under the deal, Bitfinity, the Binance unit, has issued Eqonex a $36 million (roughly Rs. 280 crore) convertible loan. It will have the power to appoint Eqonex’s chief executive officer, chief financial officer and chief legal officer, as well as two directors, the companies said.

Digivault is overseen by the FCA under Britain’s money-laundering regulations. Oversight by the FCA, Britain’s main regulator, is widely considered to be desirable for financial firms.

The FCA warned last year that Binance posed a significant risk to consumers, ordering it to cease regulated activities. Last month it said that it had concerns over a deal between Binance and UK payments firm Paysafe that allowed Binance to access a key UK payment network.

“The FCA did not have powers to assess the fitness and propriety of the new beneficial owners or the change in control before the transaction was completed,” the watchdog said in a statement after Eqonex and Bitfinity unveiled their tie-up.

“We have, however, previously published information about our concerns about Binance.”

The FCA can suspend or cancel cryptoasset firms’ registration if it was “not satisfied the firm or its beneficial owner is fit and proper,” it said, adding that it could also do so in case of non-compliance with money laundering rules.

A Binance spokesperson noted the FCA’s comments “with interest” and said the company would continue dialogue with the watchdog. Binance has previously said it takes compliance obligations seriously.

Asked about the FCA’s statement, Eqonex Chairman Chi-Won Yoon said his company shared with Bitfinity a “vision to build a digital asset ecosystem that provides institutions and individuals with safe, compliant and regulated access” to crypto.

© Thomson Reuters 2022