Authorities Scrutinize Binance's Services for EU Customers, Focus on Scope of 'Reverse Solicitation'

Binance Under Investigation for Continuing Services in the EU Without MiCA Approval

The European Securities and Markets Authority (ESMA) and regulatory authorities from France, Germany, and Greece are investigating Binance's provision of services to customers within the European Union (EU).

The focus is on how far Binance can apply the exemption provisions of "reverse solicitation" as recognized under Article 61 of the Markets in Crypto-Assets Regulation (MiCA). This reverse solicitation allows customers to request services on their own initiative from operators outside the EU under certain conditions. However, ESMA has urged a very narrow interpretation of this exception, stating it should not be used as a loophole to circumvent MiCA requirements.

Whether a customer has been solicited is determined not only by contractual language but also by the actual circumstances of solicitation or contact. Therefore, even if a contract or disclaimer positions it as reverse solicitation, if the operator was actively soliciting, it cannot serve as a basis for exemption. Additionally, even if reverse solicitation is recognized for services requested by the customer, it does not mean that unlimited provision of other products or services can be justified.

Binance faced the July 1 deadline without obtaining MiCA approval. The company had registered in France, Italy, Lithuania, Poland, Spain, and Sweden, but these registrations lapsed with the transition to MiCA.

Regulatory authorities are investigating the legal basis for this service provision, and some authorities have requested information from Binance.

Continuing Efforts to Obtain MiCA Approval, Potential Fines Depending on Responses

Binance previously applied for MiCA approval in Greece but withdrew its application in June. The company has since indicated its intention to seek approval in another EU member state and is reportedly still working towards obtaining MiCA approval.

The company states that it complies with regulatory requirements applicable in all regions where it operates and continuously reviews its services in light of relevant obligations.

Under MiCA, operators without approval were required to scale back operations within the EU after July 1 and limit services to assisting existing customers with the transfer or sale of their assets.

As a result, this investigation is questioning how far exceptions for voluntary access from customers can be recognized.

If regulatory authorities are not satisfied with Binance's responses or determine that it exceeds the scope of reverse solicitation exemptions, they may proceed with enforcement actions, including fines.

However, the current investigation has not proven any violations, and no specific measures have been decided. Similar investigations are reportedly underway for other smaller operators besides Binance.

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