BaFin flags potential Binance breaches in tokenised-stock service launch

Federal Financial Supervisory Authority BaFin warned investors about possible violations of securities laws by Binance in launching trading of tokenised stocks.

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

Two weeks later, the Financial Times reported that a review by regulators in the United Kingdom and Germany of its compliance with local law. Binance said at the time that tokenised stocks were being handled by the regulated investment group CM-Equity and complied with the provisions of MiFID II (the EU directive on markets in financial instruments).

In the document, BaFin states that the instruments are offered by Binance Germany GmbH & Co. The regulator contends that this firm offers “securities in the form of tokens TSLA/BUSD, COIN/BUSD and MSTR/BUSD without the necessary prospectuses on the website.” BaFin emphasised that CM-Equity is not mentioned in the marketing material.

“Public offering of securities without an approved securities prospectus”, the regulator said.

BaFin did not specify what action it would take against Binance, but cited potential fines in similar cases: €5 million or 3% of last year’s revenue. The law also allows an additional penalty equal to twice the amount of profit gained.

As reported, on 26 April Binance announced the listing of tokens backed by a portfolio of real shares in MicroStrategy, Apple and Microsoft.

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