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Binance Stock Tokens Could Violate Securities Laws, German Regulator Says

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The Binance Stock Tokens are a success, but this product could be missing a few legal checkboxes es according to German regulators.

Germany’s Financial Supervisory Authority is investigating Binance for its offering of tokenized shares and is already holding a preliminary opinion that doesn’t look too encouraging for the world’s leading crypto exchange.

According to a legal opinion published on its official website, the Bundesanstalt für Finanzdienstleistungsaufsicht —or simply BaFin— considers that Binance would be violating securities laws by issuing shares of publicly traded companies like Tesla, regardless of whether or not they are being exchanged on the blockchain.

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If It Looks Like a Security, Smells Like a Security, and Behaves Like a Security…

A tokenized share is the representation of a stock on a blockchain. It is in theory backed 1:1 by real shares purchased by Binance. Tokens behave similarly to normal stocks, paying dividends in cryptocurrencies in the same way a normal stock would.

In very simple terms, they operate in a similar way to a stablecion, except that the underlying asset is a share instead of money. Bittrex and FTX already offer support for tokenized stocks.

The BaFin statement did not distinguish between securities offered by traditional institutions and the product offered by Binance. It argued that Binance should have notified regulators and complied with all necessary procedures to offer securities to the German market.

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A Costly Mistake

In particular, the BaFin explains that Binance should have published a prospectus with all the information required by law to rule out fraud and legal violations. After evaluating and approving the content of this prospectus, Binance would be legally authorized to offer the tokenized shares.

“BaFin has a reasonable suspicion that Binance Deutschland GmbH & Co. KG in Germany offers securities in the form of “share tokens” with the designations TSLA/BUSD, COIN/BUSD and MSTR/BUSD to the public without the necessary prospectuses on the website https://www.binance.com/de.”

According to BaFin, Binance’s decision to offer the famous Binance Stock Tokens constitutes a violation of Article 3(1) of the EUProspectus Regulation. If this were the case, the fines could be quite hefty for Binance, being calculated on the basis of the company’s total profit – and not only on the profit obtained from trading tokenized shares.

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Pursuant to Section 24 paragraph 3 No. 1 WpPG, a breach of the prospectus obligation constitutes an administrative offence and can be punished with a fine of up to 5 million euros or 3 percent of the total turnover of the last financial year in accordance with Section 24 paragraph 6 of the WpPG. Fines may also be imposed up to twice the economic advantage of the infringement.

Binance Stock Tokens Are The Target of Regulators All Around The World

Germany is not the first country to issue an unfavorable opinion regarding Binance’s Stock Tokens. Just last week, UK authorities revealed that they were working to understand the legal nature of Binance Stock Tokens and determine whether or not they are securities. In the event that the statutory criteria deem the tokenized shares to be securities, Binance will also have to face the consequences in the UK.

And according to information from the South China Morning Post, Hong Kong authorities could be evaluating a similar scenario. However, a spokesperson told the Asian outlet that the regulatory bodies in that country would not comment with official positions.

This recent regulatory pressure marks a new hurdle for Binance which recently bet on expanding its services, offering new tokenized stocks including Coinbase, MicroStrategy, Apple and Microsoft.

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Crypto Newcomer Explodes After Abrupt Altcoin Listing on Binance

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A small-cap altcoin is shooting into the stratosphere after earning support from the global crypto exchange Binance.

The governance token Tranchess (CHESS) officially began trading today.

News of the coin’s listing triggered a 185% rise in the price of the asset – from $2.77 to $7.91. Its value has since settled to $5.09 at time of publishing.

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CHESS is listed in Binance’s Innovation Zone, a dedicated trading area where users can buy and sell newer tokens that are likely to have higher volatility and pose a higher risk to traders.

According to Binance Research,

“Tranchess is a yield-enhancing asset tracker with varied risk-return solutions on Binance Smart Chain (BSC), which consists of 3 tranche tokens (QUEEN, BISHOP, and ROOK) and its governance token CHESS. 

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The platform offers various features including a DEX (Tranchess Swap), money markets (Primary Market), staking, and network governance.”

Tranchess recently raised $1.5 million from Binance Labs, Three Arrows Capital, and other crypto venture firms.

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Binance proposes a real-time token burning mechanism to boost BNB value

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  • Binance has proposed the BEP-95 aimed to burn a percentage of transaction fees as a deflationary measure.
  • BEP-95 will occur alongside the quarterly token burn and well after the 100 million token supply is achieved.

Binance Smart Chain (BSC) is taking further steps to incorporate an additional deflationary mechanism to increase token valuation. As announced today, Binance (BNB) is introducing a new Binance Evolution Protocol (BEP) known as BEP-95. The BEP stands out from the network’s occasional token burns since it introduced a real-time burning mechanism.

According to Binance, a fixed portion of gas fees collected by validators in each block will be sent to the burn address. The ratio initially set at 10 percent, is adjustable according to changes proposed by the Binance community. BSC validators get to vote on community proposals, where voting power is based on staked BNB.

For a proposal to be reviewed by the validators, it has to receive a minimum deposit of 2,000 BNB (mainnet). All BNB is returned to holders after the finalization of the voting process. A proposal that wins is that which gathers 50 percent of the total voting power on the mainnet. Binance notes that voted-upon parameters are implemented immediately.

Details of Binance BEP-95 token burning mechanism

BEP-95 became relevant as it speeds up the BNB token burn, and makes the network increasingly decentralized. The BNB supply cap is about 168 million tokens and Binance intends to burn until 100 million tokens remain in circulation. This will take about 5-8 years to complete, according to Binance. The network’s most recent quarterly burn wiped out over 1 million tokens, worth about $639 million, from circulation.

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However, the latest update from its blog now says the BEP-95 burn “will continue functioning” even after the above target is attained. With the burn, Binance expects the intrinsic value of the BNB token to increase in tandem with demand. The network notes that validators and delegators may receive fewer tokens from staking, but the “fiat-denominated value of their rewards may increase.” Moreover, BNB has multiple use cases that benefit all holders of the token.

Currently, BEP-95 is in the draft stage and the network is yet to give a specific date for its implementation.

Several blockchains use the crypto-burning mechanism to create token scarcity and a subsequent increase in token value. Ethereum, for instance, uses the EIP-1559 for this purpose. 

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BNB price action

BNB, the fourth-largest cryptocurrency by market cap, was trading at $494 at press time, according to our data. The token has gained 0.8 percent in the day, and 4.8 percent week-over-week. Similar to other digital assets, BNB has rallied fueled by the Bitcoin-led gains. Crypto investor and YouTuber Lark Davis expects “good things” for the BNB price following its launch of a $1B growth fund.

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New proposal aims to raise Binance Coin value by burning BSC fees

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Amid the ongoing rally of Binance’s native token, Binance Coin (BNB), the developers of Binance Smart Chain (BSC) have proposed more measures to maintain the token’s deflationary model and improve its intrinsic value.

According to a new Binance Evolution Protocol, BEP-95, BSC developers are considering introducing a real-time burning mechanism for a portion of gas fees to reduce BNB supply and drive BNB value higher by increasing the demand. According to the BEP, BNB holders will decide how to dispatch the BSC gas reward.

Releasing the proposal on Friday, BSC developers noted that the new BEP might decrease the total amount of BNB that validators and delegators obtain from staking. The burning mechanism will be enabled by introducing governable parameters for two system smart contracts for collecting gas fees.

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Created by Binance in 2017, BNB is a deflationary token by design, meaning that Binance burns a percentage of the BNB supply every three months to maintain the token’s value. Binance will stop burning BNB once 50% of the initial supply has been burnt and only 100,000,000 BNB remain.

The latest BNB token burn took place last Monday, with Binance burning 1,335,888 BNB ($640 million) in its 17th quarterly burn.

The proposal comes amid BNB seeing a major rally recently, with the token breaking above $500 on Wednesday. At the time of writing, BNB is the third-largest cryptocurrency by market capitalization after Bitcoin (BTC) and Ether (ETH). The token is trading at $495, up around 44% over the past 30 days. BNB’s all-time high was recorded in May 2021, with the token surging to as high as $686, according to CoinGecko.

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The latest BIP, which occurred in August, is similar to a new transaction fee mechanism implemented for Ethereum’s London upgrade. According to Etherchain, the current average ETH burn rate amounts to 3.76 ETH or $15,448 per minute.

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