The Securities and Futures Commission (SFC) has clarified that one of the world’s largest cryptocurrency trading platforms, Binance, is not licensed or registered to trade stock tokens in Hong Kong.
“The SFC is aware that Binance has offered trading services in stock tokens in a number of jurisdictions and is concerned that these services may also be offered to Hong Kong investors,” the territory’s financial regulator said in a statement last Friday.
“The SFC wishes to make it clear that no entity in the Binance group is licensed or registered to conduct ‘regulated activity’ in Hong Kong,” it added.
Stock tokens are virtual assets which are a tokenised version of overseas listed stocks, with their prices pegged to the respective shares and can be denominated in fractional units.
In Hong Kong, the SFC has classified stock tokens as likely to be securities and are therefore subject to the regulatory remit of the watchdog. “The SFC warns that marketing and/or distributing such tokens – whether in Hong Kong or targeting Hong Kong investors require a licence from the SFC unless an applicable exemption applies,” according to the announcement.
The commission also warns that intermediaries can be prosecuted and convicted for offering stock tokens to the Hong Kong public without its authorisation or registration.
This came after Financial Services and the Treasury Bureau said in late May that all virtual asset exchanges should be licensed if they want to operate in Hong Kong. It also proposed to limit services to professional investors, that is individuals with at least HK$8m ($1.03m) of investible assets.
Regulators in the UK, Germany and Japan are among several jurisdiction that have already expressed concern about Binance offering tokenized stocks without authorization.
Binance responded on Friday afternoon that users will no longer be able to trade stock tokens by the end of the year.
“We are announcing that we will be winding down support for stock tokens on Binance.com to shift our commercial focus to other product offerings. Effective immediately, stock tokens are unavailable for purchase on Binance.com, and Binance.com will no longer support any stock tokens after 14 October,” according to an announcement on the website. Users who currently hold stock tokens may sell or hold them over the next 90 days.
Founded in Shanghai in 2017, Binance offers a wide range of services including cryptocurrency spot and derivatives trading and digital wallets and stock tokens.