The regulators in Britain and Europe are reportedly studying the new digital stock tokens, representing fractions of automobile makers Tesla and Coinbase – for potential non-compliances with the bloc’s laws.
According to a new report published by The Times, the EU regulators have expressed concerns that these new tokens don’t provide corporate disclosures. It further added that if these were to be registered as securities, an investment prospectus would be required. Meanwhile, the German regulator said,
Fundamentally […] the following applies: if tokens are transferable, can be traded at a crypto exchange and are equipped with economic entitlements like dividends or cash settlements, they represent securities and are subject to the obligation to publish a prospectus.
What are Binance Stock Tokens?
These new tokens allow the investors to purchase as small as one-hundredth share without buying the full or even holding a physical share. Reportedly, the digital token was developed with a regulator-friendly investment group in Germany and Switzerland.
In response to the scrutiny by regulators, Binance maintained that these are official products of Germany-based CM-Equity that are in full compliance with the rules. It further argued,
Currently users only buy and sell the tokens from and to CM-Equity AG, which does not require a prospectus.
Besides that, the world’s largest cryptocurrency exchange stated that share prices available in tokens are not settled in any fiat currency, instead they are settled in BUSD. Plus, it does not have the same voting rights as mainstream equity holders. The company further outlined,
Each digital token represents one share of equity stock and is fully backed by a depository portfolio of underlying securities that represents the outstanding tokens.
Meanwhile, Times suggests that regulators are concerned about the main risk information provided to investors would not be enough to comply with the rules.