Binance's Stock Tokens May Violate Law, Germany’s Financial Watchdog Says

BaFin said the stock tokens tracking Tesla, Coinbase and MicroStrategy have been identified as “suspicious” and the exchange could be fined up to $6 million.

AccessTimeIconApr 28, 2021 at 6:08 p.m. UTC
Updated Sep 14, 2021 at 12:48 p.m. UTC

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 wasn't issued prior to trading.
  • BaFin said the cryptocurrency exchange has violated the prospectus obligation under Article 3 Paragraph 1 of the European 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 that U.K.'s 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 didn't immediately respond at the time of publication.

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