BaFin calls out Binance on its 'tokenised' equities
BaFin, the German financial markets authority, has deemed that Binance, a trading platform, has not complied with securities rules in offering trading in “tokenised shares”, the Financial Times reported. In a note, BaFin stated that tokenised shares offered by Binance, such as Tesla, Coinbase and MicroStrategy, represent securities, which requires a prospectus that Binance has not issued. The crypto-currency trading platform made no comment.
“Such a violation can be termed a criminal offense and could lead to a fine of up to 3% of the issuer's last annual revenue or €5m”, the Financial Times said, adding that “the issuer may be held liable for any loss suffered by investors”.
Since the launch of this trading activity, Binance has not stated on its website whether it is an actual security or a derivative. “The token is linked to the performance of the underlying asset”, Binance said, as the token’s value tracks the market prices of its underlyings. Tokenised shares “are created on guarantees held by a third party.” Accordingly, each token represents one share in a company,” Binance added. It has joined with the German management company CM-Equity, which holds a portfolio of underlying shares in accordance with MiFID 2 rules. “Tokenised shares are structured products, such as have existed since the 1990s,” CM-Equity said in its defence in an article the French financial daily Les Echos.