Binance Faces EU Investigation Over Reverse Solicitation Exemption

Binance, one of the world's largest cryptocurrency exchanges, is under investigation by European regulators over its use of a legal exemption to serve customers in the EU without a proper license. The exchange has been accused of stretching the exemption, known as 'reverse solicitation,' well beyond its intended scope, allowing it to continue operating in the bloc despite missing the deadline to secure a Markets in Crypto-Assets (MiCA) license.

The exemption, which is meant to be used only when a client approaches the company independently, without any prior advertising or promotion, has been interpreted very narrowly by the European Securities and Markets Authority (ESMA). ESMA has stated that the exemption must be treated as the exception, rather than a way to circumvent MiCA requirements.

Binance had initially pursued a MiCA license through Greece, but withdrew its application in June after facing opposition from the central bank and high-level political intervention. The exchange then pivoted to operating via the UAE. Despite missing the licensing deadline, Binance has continued to let users open new accounts in certain European markets, relying on the reverse solicitation exemption.

The investigation, which has been ongoing for some time, is seen as a test of how strictly the exemption will be applied. A narrower reading of the exemption would carry significant consequences for other overseas crypto firms that rely on it to reach EU customers without full authorization.