Binance Faces EU Probe Over Reverse Solicitation in MiCA License Saga

European regulators are scrutinizing Binance's use of reverse solicitation to continue serving customers in the European Union without a MiCA license. The Markets in Crypto-Assets Regulation, which took effect on July 1, 2023, requires firms to obtain authorization or wind down operations. Binance, the world's largest crypto exchange, did not secure the necessary license by the deadline.

Reverse solicitation is a narrow exception that allows non-EU firms to deal with European customers if they initiate contact without being solicited. However, ESMA has reportedly told the FT that this carve-out should be treated as an exception, not a substitute for authorization. Supervisors are now testing whether Binance's arrangements meet this standard.

Some authorities have asked the exchange for information, and if the answers are deemed insufficient, enforcement could follow, including fines. Binance has stated that it complies with the rules in the jurisdictions where it operates and is working towards MiCA authorization.

The outcome of this inquiry will demonstrate how tightly supervisors intend to police the line between passive availability and active solicitation. A finding that large-scale ongoing service cannot be dressed up as unsolicited client initiative would push unlicensed platforms towards a genuine wind-down or a successful license application.