The Binance stock tokens are a major success but the product could be missing out on a few legal checkboxes according to German regulators as we can see in our latest binance news today.
The German Financial Supervisory Authority started investigating Binance for its offering of tokenized shares and is holding a preliminary opinion that it doesn’t look encouraging for the leading crypto exchange. As per the legal opinion that was published on the website, the Bundesanstalt fur Finanzdienstleistungsaufsicht or BaFin thinks that binance could be violating the securities laws by issuing shares of publicly traded companies such as Tesla no matter if they have been exchanged on the blockchain.
The tokenized share is the representation of the stock on the blockchain. In theory, backed 1: 1by real shares purchased by Binance and these tokens behave similarly to normal stocks and pay dividends in crypto in the same way as normal stocks. In simple terms, they operate in a similar way to a stablecoin except the underlying asset is a share rather than money. FTX and Bittrex already offer support for these tokenized stocks.
The statement coming from BaFin didn’t distinguish between securities offered by traditional institutions and the product offered by Binance but argued that Binance should have notified the regulators and complied with the rules to offer securities to the German Market. The BaFin explained that binance should have published a prospectus with the information required to rule out fraud and legal violations so after getting the evaluation and approving the content of the prospectus, Binance will be legally authorized to offer the tokenized shares.
“BaFin has a reasonable suspicion that Binance Deutschland GmbH & Co. KG in Germany offers securities in the form of “share tokens” with the designations TSLA/BUSD, COIN/BUSD, and MSTR/BUSD to the public without the necessary prospectuses on the website https://www.binance.com/de.”
As per the regulator, the Binance Stock tokens violate Article 3(1) of the EUProspecturs Regulation so the fines could get quite expensive for Binance. Also, Germany is not the first country to issue an unfavorable opinion about the stock tokens. UK Authorities also revealed that they were working to understand the legal nature of Binance Stock Tokens and to determine whether or not they are securities.
Furthermore, the information from the South China Morning Post shows that Hong Kong authorities could be evaluating a similar scenario but a spokesperson said that the regulatory bodies in the country will not comment on official positions.
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