That’s according to a report Thursday (Oct. 1) by the Financial Times (FT), which says this exemption has allowed the world’s latest cryptocurrency exchange to remain in Europe despite being ordered to wind down its business after failing to obtain a license.
Under the European Union’s Markets in Crypto Assets (MiCA) regulation, unlicensed crypto firms were required — as of July 1 of this year — to take immediate measures to wind down their EU business.
Now, the European Securities and Markets Authority (ESMA) as well as regulators in countries including France, Germany and Greece are probing Binance’s use of a practice known as “reverse solicitation,” sources familiar with the matter told the FT.
This is a legal exemption that lets companies based outside the European Union offer financial services to EU customers, as long as those customers pursue the relationship entirely on their own volition, the sources said.
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Regulators have requested information from Binance, and could take enforcement action such as imposing fines if they are dissatisfied with the company’s response, the sources said. One source told the FT regulators were also looking at other, smaller companies.
“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,” ESMA said.
Binance said it “complies with applicable regulatory requirements in the jurisdictions in which it operates” and that its “products and services continue to be reviewed and aligned with relevant regulatory obligations.”
“We are actively working toward becoming MiCA-authorized and view this as an important step in providing users with a consistent, regulated, and trusted service across the European market,” the company added.
Writing about MiCA earlier this year, PYMNTS noted that the regulation created a framework that — instead of “relying on piecemeal guidance or enforcement-led oversight” — covered everything from crypto exchanges to stablecoin issuers and consumer protections.
“The goal was straightforward: provide clarity, encourage innovation and establish guardrails that could help digital assets evolve into a mature financial sector,” that report said.
The report went onto cite PYMNTS Intelligence and Citi’s “Chain Reaction: Regulatory Clarity as the Catalyst for Blockchain Adoption,” which contends that blockchain’s next leap will be driven by regulation, and that MiCA initially gave Europe a major first-mover advantage over other major markets.
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