EU Regulators Examining Binance’s Stock Tokens

  • The U.K. FCA is reportedly working with Binance to better understand the stock tokens, and what regulation may apply to them.
  • Binance said a prospectus was not required as the tokens were not settled in fiat currency, but in Binance USD (BUSD).
Auditor looking through magnifying glass

Shutterstock

The newest product of popular crypto exchange Binance is being examined by European regulators, who are trying to determine whether it complied with security laws, the Financial Times reported on 22 April.

According to the publication, the European regulators are concerned whether Binance complied with security laws when launching its newest product, stock tokens representing stock shares. The U.K. Financial Conduct Authority (FCA) told the publication it was currently “working with the firm” to understand the stock tokens, see how they are marketed, and what regulations may apply to them. Germany’s financial watchdog, BaFin, declined to comment on the case, but said:

“Fundamentally, the following applies: if tokens are transferable, can be traded at a crypto exchange and are equipped with economic entitlements like dividends or cash settlements, they represent securities and are subject to the obligation to publish a prospectus.”

The Binance stock tokens were first unveiled back on 12 April, when the exchange launched its Tesla stock token representing one share of equity stock. The product enables users to trade as little as one one-hundredth of a share, and were developed by German financial services firm CM-Equity AG, which is a regulated entity. As such, the tokens are an official CM-Equity product that is compliant with E.U. Mifid II markets rules, as well as BaFin’s banking regulations.

The crypto exchange further said its Tesla and Coinbase stock tokens were not settled in fiat currency but in Binance USD (BUSD), and are not transferable to other customers. It also said a prospect was not required as its tokens do not give the same voting right as equity shareholders have, and traders can only acquire the tokens from CM-Equity. Other crypto exchanges that offer stock tokens through CM-Equity are FTX and Bittrex Global, though it remains unknown if the two are also under examination from regulators.

Even though the future of its new product is unknown, the Binance exchange has had an amazing growth in the last quarter, with it having increased its trading volume by 260% and number of users by 346%. Last week, the exchange conducted its 15th token burn and successfully reduced the BNB token supply by 1,099,888.

Discussion
Related Coverage
CAKE Jumps in Price Following Binance Labs’ Investment
  • While far from its all-time high of $43.96, the price of CAKE did jump by 7% following Binance Labs’ investment, and is now traded for around $4.7.
  • As the largest dapp on BNB Chain, PancakeSwap has been leading the development and adoption of the blockchain, which is one of the reasons behind the investment.
June 6, 2022, 3:56 PM
Illustration of business man jumping on uptrend price chart

Shutterstock

Binance’s VC Arm Raises $500M to Fund Web3 and Crypto Adoption
  • The fund is the first in Binance Labs’ history to be created with outside capital, namely from DST Global Partners, Breyer Capital, unnamed private equity funds, and others.
  • The new $500 million fund will invest in cryptocurrency companies in three stages of development, from incubation, to early-stage venture, and finally late-stage growth.
Binance Blocks Accounts of Relatives of Russian Government Officials
  • The accounts of Elizaveta Peskova, daughter of spokesman Dmitry Peskov, Polina Kovaleva, stepdaughter of Sergei Lavrov, and Kirill Malofeev, son of oligarch Konstantin Malofeev, have already been closed.
  • Last week the exchange had also implemented new stricter rules for Russian users with crypto holdings of more than €10,000, following the latest sanctions on Moscow from the E.U.