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Crypto exchange Binance is reportedly under the lens of European regulators for its stock token offering that was launched last week.

The Financial Times reported the news on Thursday, saying that European regulators, including the U.K.’s Financial Conduct Authority (FCA), are examining whether Binance complied with security rules before launching trading in stock tokens.

The FCA told the FT that it is working with Binance to understand the offering, the regulations that may apply to it, and how it is marketed. The regulator further said that “firms and their senior management teams are responsible for determining whether their products and services fall within the remit of the FCA.”

Germany’s financial regulator BaFin declined to comment on any potential examination but told the FT that if tokens are transferable, can be traded on a crypto exchange, provide dividends, and are cash-settled, they represent securities. And firms offering them are required to publish a prospectus.

Binance offers trading in stock tokens via German financial services firm CM-Equity, which is a regulated entity. CM-Equity told the FT that the product is compliant and works as a certificate for a total return swap.

The firm further said that a prospectus was not required because tokens are not transferable to other customers and are settled in Binance’s own stablecoin, BUSD, rather than cash.

Binance, on the other hand, said stock tokens do not give the same voting rights that equity shareholders get. And as traders can buy and sell stock tokens from and to CM-Equity, it does not require a prospectus, said Binance.

Binance rivals FTX and Bittrex Global also offer trading in stock tokens via CM-Equity. It is not clear whether the two crypto exchanges are also under examination of European regulators. The Block has reached out to FTX and Bittrex Global and will update this story should we hear back.

Binance could also come under scrutiny by Hong Kong regulators, suggests another report. The South China Morning Post reported Wednesday that Binance is marketing its stock token product in Hong Kong, and the campaign could be deemed a regulated activity that requires a license in Hong Kong. Binance does not have any such license in the city, according to regulatory records, per the report.

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