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

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.

DISCLOSURE

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

Tanzeel Akhtar

Learn more about Consensus 2024, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.