Binance’s Stock Tokens May Violate Law, Germany’s Financial Watchdog Says
28 Apr, 2021•2 min read•Regulation
Germany’s Financial Supervisory Authority BaFin has warned investors the cryptocurrency exchange Binance may have violated European securities rules with the launch of its stock tokens.
In an announcement Wednesday, BaFin said the Binance stock tokens tracking the movement of shares in Tesla, Coinbase, and MicroStrategy have been identified as “suspicious” and require a prospectus that has not been issued prior to trading. BaFin said the cryptocurrency exchange has violated the prospectus obligation under Article 3 Paragraph 1 of the EU Prospectus Regulation. According to BaFin the violation of the prospectus constitutes an administrative offense and can be punished with a fine of up to €5 million ($6 million) or 3% of Binance’s annual revenue. Elsewhere red flags have already been raised by Hong Kong law firms regarding the Binance stock tokens launched earlier this month. On April, 22, the Financial Times reported the U.K. regulator the Financial Conduct Authority is “working with the firm [Binance] to understand the product, the regulations that may apply to it and how it is marketed.” The stock tokens allow Binance customers to purchase as little as one-hundredth of a regular share using Binance USD (BUSD), a U.S. dollar stablecoin issued by the exchange. Binance was contacted for comment but did not immediately respond at the time of publication.