Binance Faces EU Scrutiny Over Reverse Solicitation Exemption

Binance, the world's largest cryptocurrency exchange, is facing scrutiny from EU officials over its continued operations in the region despite an order to wind down its business. According to a report by the Financial Times, Binance has been using a legal exemption called 'reverse solicitation' to continue serving customers in the EU.

Under new EU rules known as Markets in Crypto-Assets (MiCA), crypto companies were required to obtain a licence by the end of June to continue operating across the bloc. Without a licence, Binance would not qualify to continue operating in the EU from July. However, the company has been using reverse solicitation, which allows companies based outside the EU to provide financial services to customers in the bloc if those users seek the relationship entirely on their own initiative.

EU officials are questioning Binance's use of this exemption, with regulators requesting information from the company and threatening enforcement action if they are not satisfied with its response. ESMA told the FT that '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.'

Binance has stated that it complies with applicable regulatory requirements in the jurisdictions in which it operates and is actively working towards becoming MiCA-authorised.