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Binance’s New Product Under Scrutiny

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The leading cryptocurrency exchange Binance had recently launched a new product – tradable stock tokens. The tradable stock tokens are aimed to enable users to benefit from returns on equities without having to purchase full shares. The first stock token to be publically traded is Tesla. Through the stock, token users can purchase as little has one-hundredth of Tesla’s stock which will be represented by a digital token. The stock price will be settled in a stablecoin, Binance USD (BUSD), and will not be tradeable for shares.

Regulation in the cryptocurrency sphere has been a widely debated topic and with the rise of the crypto market governments are realizing regulation needs to be taken seriously while preserving an environment that harbors innovation and cooperation as well.

The new tradeable stock token of Binance has not gone unnoticed by regulators. European and British regulators are debating over the tradeable stock token’s compliance with securities laws. Germany’s Federal Financial Supervisory Authority, BaFin, is worried that the tokenized stock may not be able to provide the required transparency. There is ambiguity regarding the nature of the stock tokens and it is unclear whether they are securities or not.

The tradeable stock was designed in partnership with the regulated investment group CM-Equity AG. Binance has argued that the tokens are official products of CM-Equity AG which makes them fully compliant with European as well as German regulations. The cryptocurrency exchange further argues that since the stocks are settled in Binance USD and not fiat currency, they do not give the same rights as traditional stocks.

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