European and Hong Kong regulators are taking a closer look at the new trading in stock tokens offered by the Binance exchange. The regulators are keen to determine whether the offered tokenized securities pertain to securities, which would mean the crypto exchange must have a license to offer the tokens.

Binance announced the launch of tokenized Tesla and Coinbase securities earlier this month, allowing traders to buy fractions of the stock assets. While the crypto community celebrated the gigantic move, regulators do not seem very content with the U.K Financial Conduct Authority (FCA) examining whether all security rules were followed before listing the tokenized securities, a Financial Times report reads.

In a statement to FT, the FCA stated they are “working with Binance to understand the product, the regulations that may apply and how it is marketed.” The statement further added that it is Binance’s responsibility to determine whether the products offered are securities hence falling under the limitations provided by financial regulators such as the FCA.

While declining to comment on whether Binance tokenized assets are securities, Germany’s financial regulator, Bafin, stated,

“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.”

Moreover, the Hong Kong financial regulator is also looking into the marketing campaign of the Coinbase and Tesla stock to its citizens, a report from South China Morning Post reads. If deemed a regulated activity, Binance would require a license to operate the tokenized securities in the country.

According to the ‘Securities and Futures Ordinance law,’ “any advertisement, invitation, or document, which contains an invitation to agree to buy, or dispose of any securities to the Hong Kong public should be authorized by the SFC.” Binance does not have such a license in Hong Kong and does not bar citizens of the country from trading the tokenized securities – as they did to the U.S, mainland China, and Turkey citizens.

Binance, however, remains adamant that the tokenized securities are offered well within the set laws. The team said customers are buying a CM-Equity product compliant with the European financial regulations and Bafin’s banking regulations. Binance said,

“Currently, users only buy and sell the tokens from and to CM-Equity AG, which does not require a prospectus.”

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