According to a report, Binance could face investigation from European regulators over the issued stock tokens. The largest crypto exchange issued its first tokenized stock early this month, starting with Tesla stocks.

The U.K Financial Conduct Authority (FCA) had revealed last week that it is working to understand the product to know whether Binance has violated any securities laws. The FCA noted that the exchange could be probed for not providing enough clarity on the tokenized stocks.

Binance responded that the stock tokens are not equities, and they comply with European Union MiFID II markets and BaFin’s banking regulations. The stock tokens are settled in crypto and cannot the transferred.

Binance Responds to European Regulators

The German financial authority BaFin said on Wednesday that Binance could be fined $6 million for offering securities without a prospectus. According to the regulator, “securities investments should only be carried out on the basis of the necessary information.”

A Binance representative said that the exchange takes compliance seriously and is ready to work with the agency to address the issue.

Since the first Tesla tokenized stock was launched on the Binance platform on April 12, the exchange has added three more tokens. Also, the exchange has scheduled to launch Microsoft stock tokens on April 30.