Earlier this month, crypto exchange Binance launched its zero-commission tradable stock tokens in a move to bridge the gap between the crypto market and Wall Street. However, it has recently drawn scrutiny as Germany’s top financial regulator BaFin has warned that Binance could be heavily fined for offering security tokens without actually publishing the investor prospectus.
Earlier upon launch, Binance has already announced that it will allow users to trade tokenized shares of Tesla and Coinbase Global aginst its native cryptocurrency BUSD. On Monday, April 26, Binance also announced that it would offer investor exposure to other tokenized securities for companies like Microsoft, MicroStrategy, and Apple Inc.
However, on Wednesday, April 29, the regulator said that there’s no prospectus on the exchange’s website for Tesla, MicroStrategy, and Coinbase. BaFin said that Binance’s move is in violation of the European Union securities law and could attract a penalty of 5 million Euros or 3% of the company’s last year’s turnover. As reported by Reuters, the regulator said:
“BaFin has grounds to suspect that Binance Germany is selling shares in Germany in the form of ‘share tokens’ without offering the necessary prospectuses. Please bear in mind that securities investments should only ever be carried out on the basis of the necessary information”.
Binance Pledges Compliance With Regulators
As Binance’s stock token offerings draw scrutiny from regulators, the exchange has said that it would comply with any requirements. In an email statement to Bloomberg, the Binance spokesperson Jessica Jung said:
“Binance takes its compliance obligations very seriously and is committed to following local regulator requirements wherever we operate. We will work with regulators to address any questions they may have.”
Binance said that its stock tokens aka synthetic shares will allow investors worldwide to reap the economic benefits of the stock performance and dividends. While Binance stock tokens allow investors to purchase a fraction of the actual stock, none of the companies have actually sponsored these tokens. Besides, investors holding the Binance stock tokens don’t get to vote in actual corporate matters.