After a brief controversy in Brazil, Binance now faces scrutiny by European authorities. The reason would be the sale of tokenized shares.
In addition to worrying about the recent complaints filed by the Brazilian Association of Cryptoeconomics (ABCripto), the exchange now needs to deal with regulatory bodies in the United Kingdom and Germany.
This Thursday (22), the Financial Times reported that the UK Financial Conduct Authority (FCA) and BaFin are assessing whether the broker has complied with local regulations when trading equity tokens.
Trading of stock tokens
Last week, Binance expanded its market by listing Tesla’s share tokens. The initiative extends, according to the broker, to investors outside the United States, China and Turkey.
“Stock tokens demonstrate how we can democratize value transfer in a more integrated way. In addition to reducing friction and accessibility costs, without compromising compliance or security, ”said Binance CEO Changpeng Zhao.
However, European regulators require that share tokens comply with securities rules.
Problems in Europe
Asked about the processing of the internal process, FCA said that it is “working with the company to understand the product”. In addition, he informed that he is analyzing “the regulations that may apply [aos tokens acionários] and how they will be negotiated ”.
The German agency, however, declined to comment on the investigation, but stressed:
“If tokens are transferable, traded at a brokerage and equipped with economic rights, such as dividends or cash settlements, they represent securities.”
In this case, BaFin requires that a prospectus be published with more details of the product.
What does Binance say?
Binance took advantage of the space to clarify that the share tokens are in the custody of CM-Equity. According to the exchange, the investment group is certified by both regulators.
“Currently, users can buy and sell tokens only through CM-Equity AG. In other words, it does not require a prospectus, ”said the exchange.
The company guarantees that the new products do not offer the same voting rights as shareholders. This is because share tokens only represent fractions of stock prices.
In addition, Binance said there is no need for a prospectus, as its tokens are not transferable between users and are settled on the broker’s own stablecoin, BUSD, and not in cash.
ABCripto Complaints
The issues involving Binance and regulators go beyond Europe. In Brazil, ABCripto in March denounced the exchange’s activities to various authorities.
The Central Bank, the Securities and Exchange Commission (CVM) and the Federal Public Ministry were called into action. According to ABCripto, the cryptocurrency brokerage led by CZ operates irregularly on Brazilian soil.
In a note sent to CriptoFácil, the company stated that the accusations were unfounded and incorrect.
“Binance will reserve all of its legal rights to take other measures to protect its reputation,” he said.
In addition to the complaints, which the regulators’ investigation has not yet made public, Binance was banned by the CVM from offering future contracts in Brazil through the Binance Futures platform.
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