European regulators are targeting Binance

Cryptocurrency exchange Binance reportedly launched an equity token offering last week, a move that has attracted the attention of European regulators.

According to a report by the Financial Times on Thursday, European regulators including the UK Financial Conduct Authority (FCA) are investigating Binance to confirm whether its stock token issuance products comply with securities regulatory rules. The UK Financial Conduct Authority told the Financial Times that they have contacted Binance to learn more about the product, as well as the regulations and sales methods that may apply. The UK Financial Conduct Authority further stated that "Binance and its senior management team are responsible for determining whether its products and services fall within the remit of the UK Financial Conduct Authority."

The Financial Times also asked Germany’s financial regulator, BaFin, which declined to say whether it would conduct further scrutiny of Binance, but said that if the tokens were transferable and traded on cryptocurrency exchanges and offered dividends and were settled in cash, then they should be classified as securities, meaning companies offering such products would have to publish a prospectus.

Currently, Binance offers stock token trading through regulated German financial services company CM-Equity, which told the Financial Times that the products they offer are compliant with regulations and can also be used as proof of total return swaps. The company further stated that the trading products they offer do not require a prospectus because the relevant tokens cannot be transferred to other customers and are settled in Binance's own stablecoin BUSD rather than cash.

Binance, on the other hand, said that equity tokens do not give shareholders the same voting rights. The exchange said that traders can buy and sell equity tokens on CM-Equity, so no prospectus is required.

At this stage, Binance’s competitors FTX and Bittrex Global also provide stock token trading through CM-Equity. It is not clear whether these two cryptocurrency exchanges are also under review by European regulators. Overseas media have contacted FTX and Bittrex Global, but have not received any relevant response yet.

According to other reports, Binance may also come under scrutiny from Hong Kong regulators. The South China Morning Post reported on Wednesday (April 21) that Binance is also selling its equity token products in Hong Kong, but the activity can be considered a regulated activity and must be licensed in Hong Kong, but according to regulatory records, Binance does not have any such license in Hong Kong.