German regulators frown at Binance’s stock tokens offering

Germany’s Federal Financial Supervisory Authority (BaFin) has expressed its displeasure over Binance’s issuance of stock tokens.

In a translated version of a Wednesday notice, the agency said that it has “reasonable grounds” to suspect that Binance violated the country’s securities laws in its recent stock tokens offering.

Recall that the leading cryptocurrency exchange recently launched a tokenized stock trading service, starting with Tesla stock. As reported by BTC PEERS, the new service caught the attention of European regulators, including Germany’s BaFin.

BaFin had earlier said that if the tokens provided dividends, were transferable, cash-settled, and can be traded on an exchange, then they represent securities. However, Binance in its defense claimed that the product was being offered in partnership with German financial services firm CM-Equity, which is licensed in the country.

According to the notice from the regulators, a firm called Binance Germany GmbH & Co.KG is offering “securities in the form of 'shares token' with the terms TSLA / BUSD, COIN / BUSD, and MSTR / BUSD without the required prospectuses on the website.” There was no mention of CM-Equity in the notice. An excerpt from the notice reads:

The public offering of securities without an approved prospectus constitutes - unless an exception applies - a violation of the prospectus obligation under Article 3 Paragraph 1 of the EU Prospectus Regulation. Contrary to Article 3 Paragraph 1 of the EU Prospectus Regulation, no prospectuses have been published for the public offers of Binance Deutschland GmbH & Co. KG. There are no indications of an exception to the prospectus requirement.

BaFin was not clear on the next line of action. However, the notice outlined the potential punishment that Binance could face for violating the rules.

A violation of the prospectus obligation constitutes an administrative offense according to § 24 Paragraph 3 No. 1 WpPG and can be punished with a fine of up to 5 million euros or 3 percent of the total turnover of the last financial year according to § 24 Paragraph 6 WpPG. Fines of up to twice the economic benefit derived from the violation can also be imposed.

Binance seems undeterred by the warnings of officials. A few days after news broke that the exchange was under regulatory scrutiny, it proceeded to announce the launch of three new stock tokens - Microsoft, Apple, and MicroStrategy. While MicroStrategy is already live on the exchange, trading for Microsoft and Apple stock tokens will become available on Binance on April 28 and April 30, respectively.