Binance under fire by European regulators for stock token offering

Getting your Trinity Audio player ready...

European securities regulators are investigating cryptocurrency exchange Binance over suspicions its recent token launch constitutes a stock token offering, according to reports emerging in the financial media.

The Financial Times reported that European regulators, most notably the U.K.’s own Financial Conduct Authority (FCA), were investigating whether the launch was arranged in compliance with securities laws before being made available for sale.

In response, the FCA confirmed it was working closely with Binance to better understand the nature of its token offer, and to establish which regulations should apply to its launch.

In a reminder to other firms, the agency confirmed “firms and their senior management teams are responsible for determining whether their products and services fall within the remit of the FCA.”

Their German counterparts at BaFin have declined to comment specifically on the Binance issue, but said that tokens are securities when they are transferable, tradeable on a digital currency exchange, yield dividends and can be settled for cash—all of which could be said to apply to the Binance offering.

If this were found to be the case, Binance would be expected to publish a prospectus, as well as meeting a raft of other securities laws around the offer.

The Binance tokens have been arranged through CM-Equity, a regulated entity, which maintains the tokens are compliant, and are effectively certificates for a total return swap.

There are also further indications emerging that Binance could be in line for regulatory scrutiny in Hong Kong over the issuance, with its tokens marketing campaign there thought to be a possible regulated activity.

As such, it would require a license from the Hong Kong authorities, which records show Binance currently does not hold.

It remains to be seen whether regulators firm up their challenges to the issuance, and move towards any enforcement action against the firm.

Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups—from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift, Coinbase, Ripple and
Ethereum—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.