Binance Faces Sanctions Risk in Europe as Service Exception Comes Under Review
EU regulators are reviewing the exception that allows Binance to serve some European customers without a MiCA license, and sanctions could follow if the exchange’s interpretation is rejected.
According to a Financial Times report citing people familiar with the matter and relayed by Wu Blockchain, the European Securities and Markets Authority (ESMA) and regulators in France, Germany, and Greece are assessing whether Binance meets the conditions of the exception known as “reverse solicitation.”
The world’s largest cryptocurrency exchange failed to obtain a license this summer under the EU’s Markets in Crypto-Assets regulation, MiCA. Despite this, it continued serving some European customers by relying on the exception.
What does the exception Binance relies on allow?
“Reverse solicitation” is based on a customer approaching a company entirely on their own initiative to obtain a service. The exception, set out in Article 61 of MiCA, allows a company outside the EU to meet such a request under certain conditions.
However, if a company directs an EU customer to itself through advertising, promotion, or other means, the service is not considered to have been initiated solely by the customer. As a result, the review centers on whether Binance’s relationship with the customers it serves complies with the conditions of the exception.
What happens if regulators reject Binance’s interpretation of the exception?
According to the framework outlined by the FT, crypto companies that failed to obtain a license were required to take steps to wind down their EU operations starting July 1 and stop providing services other than helping customers transfer or sell their assets.
The key issue for Binance is the legal basis for continuing to serve some customers. If regulators reject the exchange’s interpretation of the exception, sanctions proceedings could be on the table. The review is still focused on assessing compliance; the reported development is not a final sanctions decision or a new order to suspend services.