Earlier in the month, Binance launched share tokens that represent a stock on the stock market. The two, Tesla (TSLA) and Coinbase (COIN), can be used to track the prices of correlated stocks. However, the exchange allows you to buy fractions of the shares, allowing greater access and flexibility for retail traders. The tokens are traded on Binance using Binance USD (BUSD), its native stablecoin.
The move has piqued the interest of UK regulators. At its launch, the exchange excluded users from the US, China, and Turkey from trading these currencies. Shortly after the launch, there were warnings coming from Hong Kong. Regulators wait for the exchange to obtain a license before trading the tokens to the public.
Binance collaborates with regulators
According to the Financial Times, UK regulators are seeking greater clarity on the nature of tokens. Specifically, rules governing transparency and corporate disclosure. The Financial Conduct Authority said in an interview that it was working with Binance on this.
"By working with the company to understand the product, the regulations that may apply to it and how it is marketed … companies and their senior management teams are responsible for determining whether their products and services are within the purview of the FCA."
The exchange believes the products are compliant. It claims to comply with the rules of the EU Mifid II markets and BaFin banking regulations. In addition, he has cited several reasons why they are "share tokens" and do not cross any regulatory limit as would be the case if they were securities. The exchange argues that the tokens are not transferable to other users and are settled not with cash but with their own stablecoin. Also, they do not grant token owners any voting rights like shares do.
Across the border, Germany has not commented on whether it is investigating the exchange on the new tokens.
This is not the first time that regulators have investigated Binance
As the largest cryptocurrency exchange by volume, this is not the first time it has crossed paths with regulators. US regulators earlier this year investigated the exchange about conducting business in the country without a license from the Commodity Futures Trading Commission (CFTC). Binance argued that it is not based in the US for a long time, the exchange has not been able to identify a single headquarters. He previously noted that he has a "Large number of regulated entities in multiple jurisdictions in which it operates."
The exchange recently appointed the former head of the Office of the Comptroller of the Currency (OCC) as CEO of Binance US. Additionally, former US Senator Max Baucus has joined the exchange as an advisor. Both appointments precede a critical bill from the United States Congress. The Elimination of Barriers to Innovation Act directs the SEC and CFTC to establish a task force to review digital assets. The move is progressive and seeks to achieve clearer crypto regulations.