Binance Stock Tokens were hugely popular, but they may expose Binance to legal trouble.
Germany’s federal financial regulator has warned that Binance Stock Tokens might have violated securities laws. The regulator says the tokens failed to meet all legal requirements, and an investigation into Binance is underway.
These tokenized shares provided rewards similar to ordinary stocks, with dividends paid in cryptocurrency. Unlike stablecoins, which are tied to fiat currencies, the underlying asset of these offerings is an equity security.
Binance reportedly did not satisfy regulatory requirements when launching its tokenized shares, which included tokens linked to publicly traded companies such as Coinbase, Tesla, and MicroStrategy. The regulator stated that Binance should have notified the competent authorities and met regulatory obligations before offering the product in Germany.
BaFin also said it was not given the opportunity to authorize trading in the product. By not following the required process, the tokenized shares were neither assessed for legal breaches nor legally approved. The regulator concluded that Binance therefore breached Article 3(1) of the EU Prospectus Regulation.
A passage from the published notice reads: “BaFin has a reasonable suspicion that Binance Deutschland GmbH & Co. KG in Germany is offering securities in the form of ‘stock tokens’ designated TSLA/BUSD, COIN/BUSD, and MSTR/BUSD to the public without the necessary prospectuses on the website https://www.binance.com/de.”
It is worth noting that BaFin is not the first regulator to raise concerns about the product. Binance Stock Tokens have sparked controversy in other European and Asian markets since their launch on April 12.
UK authorities recently confirmed they are reviewing the product to determine its nature—specifically whether the tokenized shares should be classified as securities. If the decision finds they are securities, Binance could face further regulatory hurdles in the UK.
The offering also met skepticism in China. Last week, the South China Morning Post reported that Binance’s stock tokens cast doubt on licensing in the region. The Asian outlet noted that such token offerings could be treated as securities, in which case they would need to secure a license in Hong Kong.