Binance’s attempts to bridge traditional markets with the cryptocurrency space in the form of fractional stock tokens have drawn the attention of Germany’s financial regulator.
The Federal Financial Supervisory Authority (BaFin) warned on Wednesday that the world’s largest cryptocurrency exchange could face fines for launching security-tracking tokens without an accompanying prospective investor.
Binance launched fractional stock tokens for Apple, MicroStrategy and Microsoft on April 26, adding to tokens for Coinbase and Tesla, which launched earlier in the month. The exchange has hired German stock company CM-Equity AG to hold its “deposit portfolio of underlying securities,” which Binance claims it provides full financial support for the tokens.
The regulator said Binance’s failure to provide an investment prospect for any of the stock tokens it launched was a breach of the European Union’s securities law and could result in a fine of five million euros ($ 6 million).
“BaFin has reason to suspect that Binance Germany is selling shares in Germany in the form of‘ stock tokens ’without offering the necessary prospectuses,” BaFin said.
“Please remember that securities investments should only ever be made on the basis of the necessary information,” the regulator added.
Binance was contacted for comment, but did not respond prior to the release. Spokeswoman Jessica Jung had said Bloomberg earlier that the exchange intended to comply with its various jurisdictional regulatory requirements, and would take steps to resolve the matter.
“Binance takes its executive duties very seriously and is committed to following requirements from local regulators wherever we operate. We will work with regulators to address any issues they may have,” Jung said.