You may face a $5 million fine – German’s regulator tells Binance

Written by: Ali Raza
April 29, 2021
  • Last week, Binance unveiled plans to offer fractional shares in MicroStrategy, Coinbase, and Tesla Inc stocks.
  • BaFin says there is no prospectus on the exchange’s website for the issue of such shares.
  • German regulator warns that the exchange could face a fine of up to €5m if it fails the regulatory obligation

Germany’s financial regulator BaFin has warned crypto exchange Binance against offering security-tracking tokens without laying out an investor prospectus.

The financial watchdog published a note on its website on Wednesday. It stated that tokens tracking the movement of shares in MicroStrategy, Coinbase, and Tesla represent securities that require a prospectus that has not yet been issued.

Binance faces a fine of €5 million

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BaFin added that such violation can be termed a criminal offense and could lead to a fine of up to 3% of the issuer’s last annual revenue or €5 million.

The regulator also stated that it has the legal power to stop any sale of securities. The warning is coming following last week’s report by the Financial Times. The report stated that Binance is on the watch list of European financial regulators for using a German broker as an intermediary to launch a new service. The service will enable investors to trade fractions of shares on its platform.

According to Binance, the program will allow users who are financially constrained to become shareholders of stocks that may have been unreachable to them due to their high value. It is providing a platform for users to buy fractional shares and benefit equally from any dividend paid on the shares.

No prospectus for issue of shares

Binance started with Coinbase Global and Tesla Inc tokens, but it’s expected to add other stocks from Apple Inc, Microsoft Corp, and MicroStrategy Inc.

However, BaFin is warning Binance that there is no prospectus on the exchange’s website for such issues. According to the regulator, it’s a violation of the European Union securities law.

However, a spokesperson for Binance has responded to the warning, saying that the company always takes local regulations very seriously.

“We will work with regulators to address any questions they may have,” the spokesperson added.