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Binance Under Scrutiny From Regulators for Stock Token Offering

2 mins
28 April 2021, 21:02 GMT+0000
Updated by Ana Alexandre
29 April 2021, 08:11 GMT+0000
In Brief
  • European regulators to examine Binance’s entrance into equities.
  • Concerns have arisen over whether stock tokens comply with current regulations.
  • Binance wants to allow European users to “trade equity shares through crypto coins.”
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Regulators in Europe have announced their investigation into Binance over its recent token launch.

European regulators have launched an investigation into cryptocurrency exchange Binance in response to its stock token offering. 

The news broke on Monday that Binance would offer tokens that give exposure to investors for MicroStrategy, Apple, and Microsoft. The trio joins Tesla and Coinbase, who were announced previously as part of the initiative. 

The goal is to allow users not residing in the United States, Turkey, or China to “trade equity shares through crypto coins that represent a share in a stock.” The tokens were conceived of as a way to monitor the share performance of each stock they represent.

Binance under fire in Europe

Binance claims that the stock token is a CM-Equity product that fully complies with MiFID II market rules in the European Union and BaFin’s banking regulations.

“Currently users only buy and sell the tokens from and to CM-Equity AG, which does not require a prospectus,” Binance reportedly said. CM-Equity is a group that handles processing for the token trades.

Regulators are now seeking to decide if the tokens fully comply with the rules that govern transparency and corporate disclosures. The FCA said they are “working with the firm to understand the product,” and “the regulations that may apply to it.”

In their own statement on the investigation, Germany’s financial regulator, BaFin said that it “has grounds to suspect that Binance Germany is selling shares in Germany in the form of ‘share tokens,’ without offering the necessary prospectuses.”

Hong Kong authorities also looking close at Binance

According to a separate report, Hong Kong regulators will also be looking into similar issues with Binance. It is possible that the campaign could fall under Hong Kong’s regulated activity and would require a specific license. A license that Binance currently does not possess, according to the Securities and Futures Commission.

The license is required by any entity that markets security tokens in Hong Kong. Binance claims they do not operate in the city of Hong Kong and therefore are not subject to the requirements by the Securities and Futures Ordinance.


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