Binance Pulls Digital ‘Stock Tokens’ After Crackdown

Digital currency exchange Binance said it is to end support for digital versions of popular stocks, such as those of Tesla, Apple and Coinbase, as it faces increasing pressure from regulators around the world.

Binance, which is the biggest digital currency exchange by trading volume, said in a statement on its website that it would stop offering “stock tokens”, crypto assets tied to the value of certain shares.

The firm had offered the tokens through a partnership with CM-Equity AG, a licensed investment firm based in Germany. Binance said each token was fully backed by shares held by CM-Equity AG.

The tokens are no longer available for purchase “effective immediately”, Binance said, adding that it is to end support for them after 14 October. Users will be able to sell or hold them for the next 90 days.

Regulatory alert

European users will be able to move their holdings to a new “portal” operated by CM-Equity AG about two to four weeks before Binance closes all positions on 15 October, the company said.

“We believe that shifting our commercial focus to other product offerings will better serve our users, and we are committed to making this transition as straightforward as possible for those affected,” Binance said in a statement.

In April Germany’s financial regulator told investors that Binance was likely to have violated securities rules by offering the stock tokens, saying it faced potential fines for not publishing investor prospectuses for the instruments.

“As the crypto ecosystem evolves, and as Binance grows as a company, we are continually evaluating our products and working with our partners to meet our users’ needs,” Binance said in a statement to Silicon UK.

The company added that it takes its legal obligations “very seriously”.

Digital crackdown

Binance’s stock tokens allowed users to effectively buy a publicly traded company’s shares without paying commission fees, and unlike conventional equities could be traded in fractions of a share.

Companies whose shares were on offer in the form of tokens included Apple, Coinbase, Microsoft, MicroStrategy and Tesla, with prices settled in Binance’s own dollar-pegged stablecoin, Binance USD.

Regulatory scrutiny of the cryptocurrency sector has increased as regulators have grown concerned about lax consumer protection and the use of digital assets for money laundering.

As one of the sector’s most prominent companies, Binance has become a focus for regulators, with the UK’s Financial Conduct Authority last month barring the company from carrying out regulated services.

Italy’s financial regulator last week said Binance was not authorised to provide investment services in the country, and Japan, Canada and Thailand have also issued similar warnings.

‘Compliance is a journey’

Hong Kong’s Securities and Futures Commission joined the others late last week, saying Binance was not licensed to carry out regulated activities in the city and that offering stock tokens to the Hong Kong public without authorisation could be an offence.

“Any person who contravenes a relevant provision may be prosecuted and, if convicted, subject to criminal sanctions,” the SFC said.

Binance chief executive Changpeng Zhao said in a blog post last week that the company “still has a lot of room to grow” and that “compliance is a journey”.