Can Binance keep serving EU customers without a MiCA license?

Binance is facing scrutiny from European regulators over its use of a MiCA exemption to continue serving some EU customers after entering July without authorization to operate across the bloc.
Summary

• EU regulators are examining whether Binance properly used reverse solicitation to continue serving some customers after entering July without MiCA authorization.
• ESMA said the exemption is narrowly framed and should not be used to circumvent MiCA requirements.
• Some regulators have requested information from Binance and could impose fines if they are not satisfied with the exchange's response.
• Binance said it is working toward MiCA authorization and complies with applicable regulatory requirements where it operates.

According to a Financial Times report on Oct. 1, the European Securities and Markets Authority and national regulators are examining whether Binance has relied properly on "reverse solicitation," which permits an overseas company to serve EU customers when those users approach the company entirely on their own initiative.

Some regulators have requested information from Binance and could pursue enforcement measures, including fines, if its explanation does not satisfy them, according to the report.

"The reverse solicitation exemption should be understood as very narrowly framed," ESMA told the newspaper. "It should be regarded as the exception and not be used to circumvent MiCA requirements."

Binance told the FT that it is "actively working toward becoming MiCA-authorised" and said it complies with applicable regulatory requirements in jurisdictions where it operates.

Binance's MiCA exemption faces a regulatory test

Reverse solicitation is permitted under Article 61 of the Markets in Crypto Assets Regulation, but the exemption depends on the customer initiating the relationship without being solicited by the overseas provider.

A company cannot rely on the exemption when it or someone acting on its behalf has solicited prospective customers in the EU through advertising, promotions or other communications. Contractual language stating that a customer approached the company independently does not override the circumstances in which the relationship began.

Regulatory attention around Binance's use of the provision had been building before the latest inquiries. Crypto.news previously reported in September that the exchange was using reverse solicitation provisions to maintain services for some European customers while it continued searching for a path to MiCA authorization.

Some trading involving EU customers was being routed through a Binance entity in Abu Dhabi, while customers who independently approached the platform could be onboarded under Binance's interpretation of the exemption. ESMA had already sought confirmation from the company that it was properly winding down activities that required authorization.

Binance said at the time that it followed the regulations of the jurisdictions where it operated and intended to continue doing business in Europe on a compliant basis.

The latest scrutiny puts the focus on whether the customer relationships Binance has maintained or accepted meet the conditions required for reverse solicitation.

Binance remained active after the July deadline

MiCA replaced the national registration arrangements that had previously allowed many crypto companies to operate in individual EU markets.

Companies covered by the transition period needed authorization as crypto asset service providers by the end of June to continue providing regulated services once the deadline passed. An authorization obtained in one member state can generally be passported across participating markets.

Binance entered July without that approval after its attempt to secure authorization through Greece ended in June.

Yet parts of its European business remained accessible after the deadline. Tests conducted in August found that Binance was still opening EU accounts more than seven weeks after the cutoff. New users in several European countries were able to register and complete identity verification, while cryptocurrency deposits remained available on some active accounts.

Binance remained absent from ESMA's register of authorized crypto asset service providers during those tests.

Access differed depending on the country and service involved. Customers in several markets had previously received instructions related to the wind-down, while some accounts were restricted primarily to withdrawals. In France, users lost access to services including spot and margin trading after the July 1 deadline.

Binance had told affected customers that their assets would remain accessible while the restrictions were introduced.

Binance is still seeking MiCA authorization

Binance originally pursued its EU-wide authorization through Greece, where an approval would have allowed it to provide covered services across the bloc through MiCA's passporting system.

The licensing process ran into trouble in June. Binance eventually withdrew the application before the transition period expired and said it intended to pursue authorization through another EU jurisdiction.

Questions surrounding the failed application continued in September after a report said European Central Bank President Christine Lagarde had intervened with Greek officials over the process.

Binance subsequently kept its European licensing plans open and said it remained committed to securing authorization elsewhere in the bloc. The exchange had not announced another MiCA authorization as of Sept. 18.

Greek officials had reportedly told ESMA in early June that the Hellenic Capital Market Commission intended to approve the application before the process changed course. Binance withdrew the filing on June 24 and said another member state would be identified when it was ready to disclose its next licensing route.

The exchange continued to serve some customers through regulatory provisions while that process remained unresolved.

ESMA is putting more attention on reverse solicitation

Scrutiny of the exemption is taking place as ESMA prepares for a more enforcement focused phase of MiCA supervision.

The regulator identified reverse solicitation among the areas it intends to examine as part of its MiCA supervision priorities for 2027, alongside outsourcing, operational resilience, liquidity and whether crypto companies maintain sufficient operations inside the EU.

ESMA plans to develop common risk indicators and reporting standards that national authorities can use when supervising crypto asset service providers. Findings from that work are expected to feed into the European Commission's review of MiCA, which is due by June 2027.

Reverse solicitation has been treated narrowly by the regulator since before MiCA's full licensing requirements took effect. ESMA's guidelines tell national authorities to monitor third country companies for signs that they are targeting EU customers, including their websites, online marketing and social media activity.

Regulators may examine local telephone numbers, website addresses, advertising activity and other signs of a company maintaining a presence or targeting customers inside the bloc.

For Binance, regulators are now seeking information directly from the company as they assess how the exchange has used the exemption since the licensing deadline. The FT reported that enforcement action remains possible if authorities are not satisfied with the exchange's response.

Binance has maintained that its European licensing process remains active and that it is working toward securing MiCA authorization.