How do you regulate an online business that facilitated $5tn of trading in the last year for 13.5m customers but has no global headquarters? Not very easily, according to the UK’s Financial Conduct Authority, which finally published last week its reasons for banning the local arm of Binance, the world’s biggest cryptocurrency exchange, from undertaking any regulated activity. While the ban’s public nature may have been a warning to retail investors, it also underscored how regulators are struggling to oversee the crypto market. More needs to be done to help.

What particularly drew the watchdog’s ire was Binance’s reluctance to explain, as part of money-laundering checks, the overarching group structure and who is ultimately behind binance.com. Being open with the regulator is an FCA principle for doing business. Moreover, knowing exactly who is behind a business, and links to other entities, is a basic requirement for FCA supervision. It is this condition the regulator deemed Binance UK not capable, currently, of fulfilling.  The upshot seems to be a large shrug by the crypto exchange. Its website did as the watchdog instructed and included a warning around its UK arm. But that does not stop UK customers from using the website to buy and sell crypto assets, which in any case remain largely unregulated by the FCA.

But even if Binance does not care much about the FCA, the rest of the regulated financial community might. While the point of the cryptosphere is that it exists outside the established financial system, the idea that it can operate without that incumbent system is naive. Customers still want to exchange their cryptocurrency into pounds or dollars, and that normally requires dealing with a traditional bank, only too aware of its anti-money-laundering obligations. The FCA action was enough to prompt lenders such as HSBC and Barclays to announce they would prevent UK customers from sending funds to Binance. Some hedge funds also stepped back. Binance’s aloofness is also a long-term tactical mistake, and not just in the UK: it squared up earlier this year to Germany’s watchdog. It may feel less punchy when it comes to the US authorities, which have reportedly launched investigations, and which have far more swingeing penalties at their disposal. Regulators, particularly those in the UK and the US, do talk to each other.

Being in the bad books of one means others may be more suspicious. For now, there is not much more in the FCA’s arsenal, beyond warning the 2.3m Britons who trade crypto assets that they need to be prepared to lose their shirts. Many armchair traders, whose ranks have swollen during lockdowns, seem nonchalant: risk is part of the thrill. Whether the FCA should have the ability to do more remains an open question, and one that should have been tackled by a crypto task force set up by the Treasury in 2018. It is yet to publish detailed policy. The authorities need to articulate, quickly, how they see their future powers. The US has been more forthright. Gary Gensler, head of the Securities and Exchange Commission, says he wants more tools at his disposal. While there is disagreement about how to tackle crypto’s boom, consensus is building on the need to target exchanges, where the cryptosphere and real world meet.

As the biggest exchange, Binance should build a dialogue with its future watchdogs, not antagonise them. The group’s founder, Changpeng “CZ” Zhao, tweeted on Thursday, seemingly apropos of nothing: “Solve problems, move forward.” He should take his own advice.