Binance Violated Securities Rules Over Stock Token Launch: BaFin

Jafrin  |  Apr 29, 2021

In a translated notice, Germany's Federal Financial Supervisory Authority, or BaFin said that Binance might be in violation of the country's securities laws in connection with its recently launched stock tokens. Such a violation represents a criminal offense that could be punished with a fine of up to €5m or 3% of the issuer’s last annual revenue.

Binance Might Have Violated Securities Rules Over Stock Token Launch

On its official website, the Bundesanstalt für Finanzdienstleistungsaufsicht or BaFin considers that the Binance cryptocurrency exchange might be violating the securities rules by launching stock tokens.

Earlier this week, Binance had announced the launch of stock tokens of companies such as MicroStrategy, Microsoft, and Apple. In the same month, the cryptocurrency exchange had previously launched stock tokens of publicly traded companies such as Tesla and Coinbase.

However, BaFin points out that there seems to be no prospectus on the exchange's website for MicroStrategy, Tesla, and Coinbase, a violation of European Union securities law.

"Securities in the form of 'shares token' with the terms TSLA / BUSD, COIN / BUSD and MSTR / BUSD without the required prospectuses on the website." read BaFin's notice

Binance Could be Fined for 5 Million Euros Over the Securities Violations

After evaluating and approving the content of the concerned prospectus, Binance would be legally authorized to offer the tokenized shares.

The BaFin, therefore, emphasizes that Binance should have published a prospectus with all the information required by law to rule out fraud and legal violations.

Even though the regulatory agency did not make it clear what steps it's going to next take, but the notice outlines the potential punishment for violations for not uploading the prospectus, i.e. a fine for five million euros or 3% of the issuer's (Binance) last year's turnover.

A tokenized share is the representation of a stock on a blockchain, backed 1:1 by real shares purchased by Binance. The tokens behave similarly to like that of normal stocks such as paying dividends in cryptocurrencies in the same way a normal stock would.

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