Binance Faces EU Regulatory Probe Over MiCA Compliance

By Nynu Jamal

Crypto exchange Binance has once again come under scrutiny, as European regulators are taking a closer look at the company’s operations in the region. The regulators mainly focus on whether the exchange has relied properly on the reverse solicitation exemption under MiCA.

European regulators review Binance’s MiCA compliance

According to a Reuters report, European officials are questioning Binance over its reliance on the “reverse solicitation” provision under MiCA. This exemption is designed for situations where customers independently seek services from a company based outside the European Union.

Now, the regulators are checking whether the company’s services to some EU customers fit those conditions. The review could take a serious turn if the regulators conclude that the exchange has used the exemption to continue activities that normally require MiCA authorization. The European Securities and Markets Authority stated:

“The reverse solicitation exemption should be understood as very narrowly framed. It should be regarded as the exception and not be used to circumvent MiCA requirements.”

Reportedly, the regulator has asked Binance to provide additional information. If the exchange fails to provide clarity on the matter and address the issue, it could lead to further actions from the authority, including fines.

How is Binance using the reverse solicitation exemption?

Under Article 61 of MiCA, the reverse solicitation exemption is applicable when a customer in the EU approaches a company outside the bloc entirely on their own initiative. This means that the overseas company cannot target or encourage the customer to use its services.

Thus, the current review is based on a possible move from Binance’s part. The regulator is checking whether the exchange has relied on the exemption and actively reached out to potential EU customers through advertising, promotions, or other forms of communication. The company cannot simply argue that the customer has approached the platform independently if the circumstances prove otherwise.

The ESMA is examining how Binance has applied the exemption while serving some European customers. The regulator wants to know whether those customer relationships began solely through individual requests or whether the exchange has taken the initiative.  

However, Binance has defended that it strictly follows regulations in all the markets it operates. The company added that it intends to continue serving the European customers complying with local rules. The exchange noted that it is “actively working toward becoming MiCA-authorised.”

Binance continued some EU services after MiCA deadline

Notably, MiCA had replaced the older national registration systems that allowed crypto companies to operate separately across EU countries. The new rules required companies to have authorization by the end of June to continue offering services.

Meanwhile, Binance entered July without a MiCA license after its authorization attempt in Greece ended in June. Thus, parts of its European platform remained accessible after the deadline. In August, it was found that some users in European countries could still open accounts and complete identity verification. Some also retained access to crypto deposits and other services. The exchange also remained absent from ESMA’s register of authorized crypto service providers.

Source:: Binance Faces EU Regulatory Probe Over MiCA Compliance