Binance ends support for stock tokens as regulators issue warnings

    19 Jul 2021

    Binance is removing its tokenized stock trading feature. The decision comes as Hong Kong’s and Lithuanian regulators issued warnings about the exchange’s registration status.

    Binance will no longer offer digital versions of stocks like Coinbase, Tesla, and Apple, as the crypto exchange faces growing pressure from regulators worldwide. The world’s biggest digital currency exchange by trading volume said Friday in a blog post that it would end support for “stock tokens,” crypto-assets tied to the value of certain shares.

    “Effective immediately, stock tokens are unavailable for purchase on, and will no longer support any stock tokens after Oct. 14, 2021, 19:55 UTC,” said the Binance statement.

    That decision comes after the Securities and Futures Commission (SFC) in Hong Kong said it was concerned that the stock tokens Binance was offering would be available to its investors. The SFC recalled that no entity in the Binance group is licensed or registered to conduct “regulated activity” in Hong Kong.

    According to Hong Kong’s authorities, stock tokens are likely to be considered “securities” under the Securities and Futures Ordinance (SFO). If found so, they are subject to the regulatory remit of the SFC. The SFC also warned that where stock tokens are considered “securities,” they also require proper licensing.

    Meanwhile, the Bank of Lithuania noted that crypto-asset-related services are not regulated or supervised. Having assessed publicly available information, it assessed Binance as a virtual currency exchange operator and a virtual currency wallet operator.

    Michael Kott, founder, and CEO of CM-Equity AG, a 19-year-old German financial services firm through which Binance offered the service, told The Block that it was simply a business decision.

    “Binance did not [have] to cease this, and I can ensure you nobody forced them,” he claimed. “They decided to do so to focus on other crypto-related products, which is their main business.”

    Binance spokesperson also said to CNBC: “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.”

    “We take our legal obligations very seriously and engage with regulators and law enforcement in a collaborative fashion. We don’t comment on specific matters or inquiries,” he added.

    Stock tokens, also known as tokenized stocks, are blockchain-based shares of publicly traded companies. Binance launched its stock tokens trading service in April of this year, although it didn’t appear to gain much traction. The total trading volume of Binance’s five stock tokens offering — Apple, Coinbase, Microsoft, MicroStrategy, and Tesla — was only around $1 million at the moment.

    As reported before, Gemini, Coinbase, and Kraken crypto exchanges plan to embrace regulation to beat Binance, which continues to dominate crypto trade volumes.

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