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Monday, May 17, 2021

Binance’s Latest Venture Is A Risky Business

The newest venture from Binance has signaled red flags. Regulators investigate if security rules are violated. Binance is seeking to start trading stocks of Apple, Tesla, and Coinbase.

A Very Ambitious Approach From Binance

Binance is currently the largest exchange for cryptocurrency in the world. As such, it has looked into a variety of businesses over the past few years pursuing industry dominance and profit. This includes sponsoring the firm’s blockchain, backing the decentralized exchange, and also launching BNB, their “utility token”. Currently, the token has a market capitalization value of $87B.

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The latest venture from Binance is to look at trading stocks of Coinbase, Apple, and Tesla in its tokenized version. As such, both regional and national regulators are going to put unwanted attention on Binance.

On 12th April, the firm had launched a trading service involving “stock token”. It came just as the Coinbase IPO was going to take place. According to the firm, the new service is going to allow users to purchase “stock tokens”. These tokens represent shares or a fraction of the shares of public companies. The transactions will be settled in BUSD, the stablecoin of Binance linked to the dollar. The tokens have the complete backing of stocks that CM-Equity AG holds. The company claims that the German firm for asset management is fully regulated and licensed.

However, several parties suspect that security rules might be being flouted in the move. Henry Chong, Fusan’s chief executive, explained that the aggressive use of “stock” is the uncomfortable factor. However, a representative of the company claimed that the stock token entitles holders to have economic exposure to the specific stocks in a trusted and convenient manner.

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However, James Angel, Georgetown University’s associate professor, said that the innovative token carries a major risk. As such, there is no way to trust that the token stands for what Binance says it stands for. All the ownership rights will not rest with you if you have such a token.  

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