Binance Exchange to Discontinue Stock Tokens Amidst Regulatory Wave

The leading crypto exchange platform has decided to discontinue stock tokens after facing a barrage of negative news and increased regulatory scrutiny.

By
Chung Yee
on
July 20, 2021
Category:
Blockchain News

Stock Tokens Are Out 

Binance has announced that it will cease supporting stock tokens. Effective immediately, stock tokens are no longer available for purchase on the exchange’s platform.

Users that are currently holding stock tokens can sell or continue to hold them for the next 90 days. Thereafter, the users will no longer be able to manually sell or close their position after October 14, 2021. The decision was announced on July 16, 2021

The decision came after Hong Kong’s Securities and Futures Commission (SFC) issued a warning that Binance is offering securities through stock tokens. Binance is not licensed or regulated by the SFC to conduct ‘regulated activities’ in Hong Kong. 

Stock tokens are representations of underlying listed stocks and their prices are directly linked to the performance of the respective stock. 


Investor Safety is the Priority

The fear that regulators echo is the safety of the investors. Unregulated activities may not have the necessary due diligence or audit by an independent third party to verify the representations made.

The stock token may not be backed by an equivalent depository portfolio of the underlying stock. Italy also took the same position to warn its people that Binance is not authorized nor licensed to carry out regulated activities in Italy. 

Regulated Activities

Stock offerings are generally defined as securities. In America, section 5 of the Securities Act 1933 makes it mandatory for assets classified as securities to fall under a regulatory regime. Regulation of securities is important because investors must be protected and the integrity of the market must be maintained.

This provision is generally adopted in all jurisdictions to facilitate fair, orderly and efficient capital markets. 

A stock token is a derivative of the underlying asset. If the underlying asset falls squarely within a regulatory framework, the product that is linked to the underlying asset shares the same traits. Therefore, it is easy to conclude that stock tokens, unlike other cryptocurrencies, fall squarely within the definition of ‘securities’. 

Source : Tesla was the first stock token offered by Binance in April this year


Binance was formerly offering digital versions of Tesla, Apple and Coinbase, which are stocks listed in the U.S. Stocks Exchange. The first stock token offered by Binance was that of Tesla. The trade started on April 12, 2021. The trading of tokenized shares was developed by a licensed investment firm, CM-Equity AG. Tokenization of shares was done through Digital Assets AG. Binance in its announcement, also announced that users residing in the European Economic Area (EEA) can migrate to CM-Equity AG’s platform subject to the platform’s Know-Your-Customer (KYC) protocol. 

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Chung Yee

Chung Yee has a legal background and has been involved in research works for the legal and compliance industry. Writing is his passion, centered on topics such as the blockchain and finance.

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