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Hong Kong SFC Issues Warning, Binance Halts Stock Token Trading

Hong Kong SFC Issues Warning, Binance Halts Stock Token Trading

Hong Kong’s market regulatory body, the Securities and Futures Commission (SFC), has issued an official statement on Binance, the world’s largest crypto exchange. According to the SFC, Binance is not licensed to sell ‘stock tokens’ in its jurisdiction.

The SFC’s announcement comes after Binance announced that it will no longer offer stock tokens on its platform, coming in as anticipated disclosure from the crypto exchange a few hours before the SFC made their statement public.

The stock token service on Binance was first introduced in April of this year, with offerings provided for Apple ($AAPL), Coinbase ($COIN), Microsoft ($MSFT), MicroStrategy ($MSTR), and Tesla ($TSLA), with total trading volume round off at roughly $1 million. The service was offered by Binance through the German financial services firm CM-Equity. Binance states that CM-Equity AG is about to set up its own stock tokens trading portal for consumers within the European Economic Area (EEA) and Switzerland.

In a statement, the Hong Kong Securities and Futures Commission said “[...] no entity in the Binance group is licensed or registered to conduct ‘regulated activity’ in Hong Kong.” SFC’s executive director of enforcement adds:

“The SFC does not tolerate any violations of the securities laws and will not hesitate to take enforcement action against unlicensed platform operators where appropriate [...]”

Regulators from across the globe have also issued warnings to Binance, with Italy, Thailand, Japan, Poland, the Cayman Islands, Germany, and the U.S. following the first public consumer warning issued by the U.K.’s Financial Conduct Authority.

Stock tokens offered by Binance work as virtual assets that are “tokenized” through a smart contract that represents backing on depository portfolios referenced or indexed on listed stocks from global stock exchanges. In reference to Hong Kong’s laws on securities, the SFC identifies stock tokens as securities, hence the regulatory oversight necessary for offering them within the Hong Kong jurisdiction.

The Hong Kong government has plans under its legislative strategy to require all operating cryptocurrency exchanges within its jurisdiction to be licensed by the SFC. The plans further outline that the services should only be offered to professional investors and not the general public, as has been the case with Binance’s stock token trading services.

Currently, this plan has not yet been implemented, and exchanges may apply but are not necessarily required to do so in order to operate. According to data from CoinMarketCap, Binance remains as the crypto space’s largest crypto exchange in operation, with over $13 billion in 24-hour trading volume.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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