BaFin Says Binance’s Stock Tokens May Violate Law

BaFin said the stock tokens tracking Tesla, Coinbase and MicroStrategy have been identified as “suspicious” and Binance could be fined up to $6 million.

April 29, 2021 | AtoZ MarketsThe Federal Financial Supervisory Authority (BaFin) has warned Binance of a possible violation of securities laws when it launches tokenized stock trading.

On April 12, the cryptocurrency exchange announced the launch of a new service.

Binance could face heavy fines over stock token

Two weeks later, the Financial Times announced that regulators in the UK and Germany had checked its compliance with local legislation. Then Binance announced that the tokenized shares are processed by the regulated investment group CM-Equity and comply with the provisions of the second edition of the EU Markets in Financial Instruments Directive (MIFID II).

The BaFin document states that the tools are being implemented by Binance Germany GmbH & Co. According to the regulator, this firm offers “securities in the form of TSLA/BUSD, COIN/BUSD and MSTR/BUSD tokens without the required prospectuses on the website.” BaFin emphasized that CM-Equity is not mentioned in the marketing material.

A public offering of securities without an approved prospectus is a violation of the EU Prospectus Regulation,” the regulator said.

According to BaFin, the violation of the prospectus constitutes an administrative offense and can be punished with a fine of up to €5 million ($6 million) or 3% of Binance’s annual revenue. Also, the law allows for additional collection of double the amount of the profit received.

Recall that on April 26, Binance announced the listing of tokens backed by a portfolio of real shares of Microstrategy, Apple and Microsoft.

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