Binance crypto exchange has been warned by Germany’s federal financial supervisory body, BaFin, about the possibility of being fined for providing tokenized stock trading services without first publishing an investor prospectus.
About Binance’s recently announced stock tokens operation, Germany’s financial regulator has stated that it has fair grounds to believe the exchange breaks the country’s securities laws.
Binance announced on Monday, April 26, that it would begin offering stock tokens priced and settled in the exchange’s cryptocurrency (Binance BUSD stablecoin), granting investors access to Apple Inc., Microsoft Corp., and MicroStrategy Inc. stocks.
However, as noted by the Financial Times, the announcement has raised eyebrows across Europe’s regulatory environment, including Germany. Binance‘s offering is made possible by a collaboration with CM-Equity, a German financial services business with a license in the country.
The German regulator reported on Wednesday, April 27, that there appeared to be no prospectus on the exchange’s website for the Coinbase, Tesla, and MicroStrategy problems, which is a breach of European Union securities laws that could result in Binance being fined 5 million euros ($6.04 million), or 3% of last year’s turnover.
The regulator suspects a company called “Binance Germany GmbH & Co. KG” of offering securities in the form of shares tokens with the terms MSTR / BUSD, COIN / BUSD, and TSLA / BUSD without the appropriate prospectus on the website, according to BaFin’s notice.
On the other hand, the regulator made no mention of CM-equity in the notice.
The notice does not clarify what steps BaFin will take next, but it does illustrate the possible consequences of violating the prospectus provision.
The announcement has elicited no immediate response from Binance.
Stock Trading on Crypto Exchanges in a New Era.
Crypto exchanges attempt to break into the tokenized stock market by enabling users to buy fractions of publicly-traded companies’ shares. Binance, for example, has followed in the footsteps of its rivals Bittrex Global and FTX, in launching such a service with tokenized stocks.
Shares of publicly traded firms can be traded as tokens on crypto exchanges, allowing users to buy fractional shares with cryptocurrencies. Tesla and MicroStrategy are two well-known companies that have entered the rapidly expanding crypto market. The invention has aided in the rise of Bitcoin’s price and has also increased public awareness of cryptocurrencies.