- EU officials question Binance’s exemption use after its MiCA license rejection.
- ESMA says reverse solicitation is narrow and must not bypass MiCA requirements.
- Binance says it seeks MiCA approval as regulators request details and weigh fines.
European Union regulators are scrutinizing Binance over its use of a legal exemption to continue serving customers despite an order to wind down operations in the bloc. The scrutiny follows the rejection of the exchange’s license application earlier this year, a setback that threatened access for millions of users.
The Financial Times reported that some regulators have requested information from Binance and could take enforcement action, including fines, if its response fails to satisfy them. The questions center on “reverse solicitation,” the exemption Binance has relied on to maintain services for EU customers after losing permission to operate under the new licensing regime.
EU Scrutiny Centers on Binance’s Use of Reverse Solicitation
The European Securities and Markets Authority, known as ESMA, emphasized that reverse solicitation should be interpreted narrowly and treated as an exception. The exemption allows firms outside the European Union to serve customers only when those users initiate the relationship independently, and regulators warn it must not be used to circumvent MiCA requirements.
The scrutiny focuses on how Binance has applied this exemption while continuing to serve EU customers despite the wind-down order.
MiCA License Rejection Threatens Access for Millions
The scrutiny follows Binance’s unsuccessful application under the Markets in Crypto-Assets framework, or MiCA. The rejection earlier this year cost the company permission to offer services to clients in the European Union.
Cryptocurrency firms were required to secure a MiCA license by the end of June to continue operating across the bloc. Without one, Binance did not qualify to maintain its EU operations from July.
For millions of users, the licensing rejection threatened access to the exchange. Binance nevertheless continued to serve regional customers under the exemption, drawing questions from officials despite the order to wind down its business.
Binance Says It Is Working Toward MiCA Authorization
Responding to the report, a Binance spokesperson said the company complies with applicable regulatory requirements in the jurisdictions where it operates.
The spokesperson added that Binance is actively working toward obtaining MiCA authorization following the earlier rejection, even as regulators review its use of the exemption.
The outcome of the review could determine whether Binance can continue serving EU users under the exemption or faces stricter enforcement under MiCA rules.
Related: Binance Faces U.S. Probe Over Possible Iran Sanctions Violations
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