Binance’s EU services face scrutiny over licensing exemption: Report
EU regulators are examining how Binance is using a carve-out to serve European customers without the proper paperwork, according to a new report. The probe involves ESMA and watchdogs in France, Germany and Greece, and it centers on a rule that lets foreign crypto firms handle business with Europeans who contact them first.
The Financial Times reported the examination on Thursday. It follows months of pressure on Binance from European authorities, who have pushed the exchange to secure the necessary licenses under the bloc’s Markets in Crypto-Assets Regulation, or MiCA.
What the carve-out actually is
Reverse solicitation is the carve-out in question. Under MiCA, it lets non-EU crypto asset service providers — CASPs — serve customers who approach them entirely on their own initiative.
That carve-out exists to protect genuine self-directed business. Companies cannot use it to avoid MiCA requirements altogether.
ESMA’s guidelines stress that companies cannot use the exemption to circumvent MiCA requirements.
Why Binance withdrew its Greek bid
Binance pulled its Greek MiCA application in June. It said at the time that it would seek authorization in another EU member state instead.
Since then, Binance has continued pursuing MiCA authorization while telling Cointelegraph it remains committed to operating in Europe on a long-term compliant basis. The exchange told Cointelegraph on Sept. 18 that it continues pursuing MiCA authorization and remains committed to operating in Europe on a long-term compliant basis.
Some EU traders are now being served through Binance’s Abu Dhabi-regulated entity, according to the FT. That arrangement raises questions about which rules apply to those transactions.
The jurisdiction question
Ahead of the end of MiCA’s transitional period on July 1, Binance told Cointelegraph that EU access depends partly on a user’s jurisdiction, account status and “servicing entity.” That suggests the exchange routes some customer traffic through regulated entities in other jurisdictions rather than holding licenses in the countries where its users sit.
Binance’s position is that it complies with applicable regulatory requirements when asked about talks with EU regulators. The company told Cointelegraph it “complies with applicable regulatory requirements” when asked about talks with EU regulators.
ESMA pushes for more power
ESMA on Wednesday called for stronger powers over non-EU companies soliciting European investors without MiCA authorization. The regulator’s proposals would support faster, more consistent supervisory action across the EU and reduce opportunities for companies to exploit regulatory differences.
ESMA Chair Verena Ross said Monday that the regulator’s MiCA focus had shifted “from rulemaking towards supervision and convergence.”
“from rulemaking towards supervision and convergence”
That suggests the agency is moving from setting rules to enforcing them.
The register grows
ESMA’s register of non-compliant crypto providers grew from 164 entries on July 16 to 173 in its Sept. 30 update. Binance does not appear on the latest register, which MiCA describes as “non-exhaustive” and which ESMA updates based on information from national authorities and other sources.
Germany’s BaFin declined to provide further information, citing legal confidentiality obligations. ESMA and the French and Greek watchdogs had not responded by publication.
What the scrutiny means
The examination is not yet public. The Financial Times report cites people familiar with the matter, which means the details have not been confirmed by the regulators themselves.
But the direction is clear. European authorities are looking closely at how Binance applies the reverse solicitation carve-out, and they want to know whether the exchange is treating it as a loophole or as a genuine carve-out.
The stakes for Binance
Binance operates across multiple jurisdictions worldwide. The company has pursued MiCA authorization while routing some services through its Abu Dhabi-regulated entity.
The exchange has withdrawn applications and moved services to Abu Dhabi-regulated entities. These arrangements raise questions about how European customers are protected.
If European authorities conclude that Binance is using the carve-out improperly, the consequences could be significant. The exchange could face demands to pull back operations, pay fines or even be barred from serving European customers at all.
The bigger picture
MiCA sets requirements for CASPs operating in the EU.
The regulation also includes a transitional period that ends on July 1.
ESMA’s push for stronger powers reflects a broader shift in how European regulators treat crypto. The agency is moving from setting rules toward enforcing them.
What happens next
The scrutiny is ongoing. Regulators in France, Germany and Greece are involved, along with ESMA, and the Financial Times report notes that none of them responded by publication.
Binance has said it is pursuing MiCA authorization. Whether that pursuit leads to actual licenses remains to be seen.
The company’s general position — that it complies with applicable regulatory requirements — is a statement of intent, not a response to the scrutiny itself.
The coming weeks will show which path Binance chooses. The scrutiny is live, the regulators are watching, and the clock is running.
For Binance, the question is simple: compliance or carve-out. The paper’s view is that the rules should be followed, and that the carve-out should not become a loophole.
Where the paper stands
The paper backs Binance against the regulators’ attempt to use a carve-out rule as an excuse to force the exchange into a licensing scheme that would favor bigger players, and is against regulators expanding their reach beyond the specific harm they are investigating. The carve-out was designed to protect genuine self-directed business, not to create a loophole.
The regulators’ push for stronger powers over non-EU companies soliciting European investors without MiCA authorization looks like an effort to widen their own reach, and the paper opposes that. The carve-out already bars companies from using it to avoid MiCA requirements altogether.
The scrutiny is ongoing, and the regulators have not responded to the Financial Times report by publication. The report cites people familiar with the matter, which means the details have not been confirmed by the regulators themselves. The paper will continue to follow the case, but for now, the key question is whether the regulators are investigating a real problem with Binance’s carve-out use or simply trying to build a case for broader authority.
Source material: “Binance’s EU services face scrutiny over licensing exemption: Report,” Cointelegraph.
Get the Notebook.
The day's best stories and every fresh verdict, in plain English, in your inbox by seven. One email a day, no more.