Binance under regulatory scrutiny for offering stock token

Binance, the world’s largest cryptocurrency exchange, is reportedly under regulatory scrutiny for its stock token listing launched last week.

According to a report from the Financial Times (FT) on Thursday, European officials, including the Financial Conduct Authority (FCA) have Binance under their lens. They are trying to determine whether the exchange complied with security rules before launching its stock token offering.

The FCA confirmed to FT that it was already working with Binance to understand the nature of the offering – how it is marketed and the regulations that may apply to it. FCA clarified that "firms and their senior management teams are responsible for determining whether their products and services fall within the remit of the FCA."

Although Germany’s financial regulator BaFin did not clarify its stance on the issue, they said that if the tokens were transferable, provided dividends, can be traded on an exchange, and are cash-settled, then they represent securities. And on this note, Binance may be required to publish a prospectus.

Binance insists that its offering is not a security. They told FT that the stock tokens are being offered via German financial services firm CM-Equity, a regulated entity. As such, the product is compliant with the EU’s Mifid II markets requirements 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.”