Germany’s markets regulator has rejected a request from crypto exchange Binance to remove a warning on possible securities rules violations, in a deepening dispute over trading in “tokens” linked to stocks.

BaFin last week cracked down on stock tokens that Binance says represent shares in US-listed companies including Apple, Tesla and Coinbase, arguing these types of offerings require the filing of an investment prospectus. Failure to provide these documents could represent a criminal offence, it said.

But the exchange, one of the world’s biggest in the fast-growing market for cryptocurrencies, told BaFin that the regulator’s view was based on a “misunderstanding”, according to people familiar with the matter. It had called on BaFin to delete the warning from its website, but the watchdog had not budged, these people said.

The deepening dispute highlights how financial regulators are beginning to take a more active role in overseeing portions of the largely unregulated cryptocurrency industry as it makes inroads into traditional and highly controlled markets such as equities.

Binance has told the regulator its stock tokens are not securities since they are bought and sold through a third-party broker and cannot be transferred to other customers or exchanges, according to people briefed on its position.

But the German regulator told the Financial Times that the trading on Binance itself was sufficient to make the tokens represent a security or a financial investment product, which also requires a prospectus.

Under German rules, securities and other “investment products” cannot be sold without the publication of a prospectus, which requires the prior approval of BaFin. The regulator ensures such a disclosure “contains the minimum information required by law and whether it has been written in a way that is readily understandable”.

Binance told the Financial Times that “we do not comment, as a matter of policy, on communications with any regulators”, adding that it took compliance obligations “very seriously”. The exchange also stressed it was “committed to following local regulator requirements wherever we operate. We will work with regulators to address any questions they may have.”

The exchange has a further week to respond to BaFin’s notice, which was issued last Wednesday. In its statement last week, BaFin pointed out that a violation of prospectus obligations could be punished with a fine of up to €5m or 3 per cent of the issuer’s last annual revenue. The issuer might also be liable for any investor losses. The regulator has the legal power to ban sales of the securities.

Binance is by far the world’s biggest digital currency venue by volume with turnover often exceeding $50bn a day, according to CoinMarketCap.com. It lacks a formal corporate headquarters, but has subsidiaries that operate in many jurisdictions.

The UK’s Financial Conduct Authority, which oversees a Binance unit based in London, told the FT last month it was also examining the group’s launch of stock token trading. In addition to stock tokens and trading in a wide range of cryptocurrencies, Binance also offers its users a range of more complex financial products, including crypto futures and options.