Germany's financial watchdog warns crypto exchange Binance over "stock tokens"

·1 min read
FILE PHOTO: The logo of Germany's Federal Financial Supervisory Authority BaFin (Bundesanstalt fuer Finanzdienstleistungsaufsicht) is pictured outside an office building of the BaFin in Bonn

BERLIN (Reuters) - Germany's financial regulator BaFin warned that Binance, one of the world's largest cryptocurrency exchanges, risked being fined for offering its securities-tracking digital tokens without publishing an investor prospectus.

On Monday, Binance said it would offer "stock tokens" denominated in the exchange's own cryptocurrency giving investors exposure to MicroStrategy Inc, Microsoft Corp and Apple Inc.

These joined tokens representing Tesla Inc and Coinbase Global Inc that are already trading.

But the regulator said on Wednesday there seemed to be no prospectus on the exchange's website for the MicroStrategy, Tesla and Coinbase issues, a violation of European Union securities law that could result in Binance, as issuer, being fined 5 million euros ($6 million) or 3% of last year's turnover.

"BaFin has grounds to suspect that Binance Germany is selling shares in Germany in the form of 'share tokens' without offering the necessary prospectuses," it said. "Please bear in mind that securities investments should only ever be carried out on the basis of the necessary information".

It was unclear if prospectuses were available for the other traded tokens.

"Binance takes its compliance obligations very seriously and is committed to following local regulator requirements wherever we operate. We will work with regulators to address any questions they may have," a Binance spokesperson said.

Binance operates in a number of markets, including Britain.

A spokesperson for the UK's financial watchdog said: "The firm offers a number of regulated and unregulated products and services across multiple jurisdictions ... We are working with the firm to understand the product, the regulations that may apply to it and how it is marketed."

(Reporting by Thomas Escritt in Berlin; Additional reporting by Tom Wilson in London; Editing by Matthew Lewis and Hugh Lawson)