Binance uses MiCA workaround to keep some EU customers: report

Binance has continued serving and onboarding some European Union customers more than two months after missing the bloc’s MiCA licensing deadline, using regulatory provisions and offshore routing while it seeks authorization elsewhere.

According to a Bloomberg report, the world’s largest crypto exchange has remained active in parts of the 27-member bloc despite withdrawing its Greek Markets in Crypto-Assets application in June and entering July without the authorization required for EU-wide operations.

People familiar with the matter said Binance has relied partly on MiCA’s “reverse solicitation” provision, which permits certain services when customers approach an unlicensed crypto company on their own initiative instead of being targeted through marketing. Binance has interpreted the provision as allowing it to onboard new customers who independently seek out the platform, the people said.

Trading for some EU-based customers has meanwhile been routed through a Binance entity in Abu Dhabi, where the business operates under a different regulatory framework, according to the report.

The arrangements have allowed Binance to maintain part of its European business while pursuing MiCA authorization. Binance said in a statement that it follows regulations in jurisdictions where it operates and remains committed to doing business in the EU on a “long-term, compliant basis.”

“We are actively working toward becoming MiCA-authorised and view this as an important step in providing users with a consistent, regulated, and trusted service across the European market,” the exchange said.

Binance has kept some EU customers after the MiCA deadline

Binance’s continued presence follows months of uncertainty over what would happen to its European operations after the July 1 licensing cutoff.

Crypto.news previously reported that Binance was still opening EU accounts in August, more than seven weeks after the deadline. Tests across Austria, France, Germany, Spain and Belgium found that some new users could complete registration and identity verification, while crypto deposits remained available on active accounts.

One account created on Aug. 19 using a European identity document and residential address was verified and subsequently funded with cryptocurrency. Binance remained absent from the European Securities and Markets Authority’s register of authorized crypto providers.

MiCA requires crypto asset service providers to secure authorization from a regulator in one EU member state. Once approved, a license can be used to provide covered services across participating markets in the bloc.

ESMA had instructed unauthorized providers before the deadline to stop onboarding new EU customers and limit remaining services to steps required for customers to exit. By July 1, those companies were expected to have implemented their wind-down plans.

For Binance, the change affected customers differently depending on where they lived. In France, Spain, Italy, Poland, Sweden and Lithuania, where Binance previously maintained local entities, customers received multiple emails asking them to leave the exchange, Bloomberg reported.

Most affected accounts were restricted to withdrawals instead of active trading, although some customers were subsequently allowed to return under Binance’s interpretation of reverse solicitation.

Binance had told customers that assets would remain accessible when MiCA service changes began on July 1. CEO Richard Teng said affected users would retain access to previously communicated options, including withdrawals.

Greek MiCA application ended before a regulatory decision

Binance had sought to obtain its MiCA authorization through Greece, which would have given the exchange access to customers across the EU through the regulation’s passporting system.

Its prospects deteriorated in June as scrutiny of the application increased. The Hellenic Capital Market Commission was expected to consider Binance’s application at a board meeting on June 17, according to Bloomberg, but the company withdrew the filing on June 16. The regulator said no decision was therefore made.

Before the withdrawal, Binance maintained that it had received no formal indication that its application would be rejected. The exchange said it believed it had met the relevant MiCA requirements.

Concerns over the Greek application had surfaced earlier in June when the licensing process moved toward rejection, putting Binance’s ability to continue serving EU customers after the transition period at risk.

European Central Bank President Christine Lagarde personally intervened behind the scenes to prevent the application from being approved, Bloomberg reported, citing people familiar with the matter. The ECB declined to comment.

Reports of Lagarde’s involvement had emerged while Binance’s Greek licensing bid stalled ahead of the deadline. Binance maintained at the time that its application met MiCA requirements and warned that delays to authorization could affect competition and liquidity.

As the Greek process ran into trouble, Binance said it would pursue another EU route if the application did not advance. The exchange has yet to publicly confirm which member state could handle its next application.

ESMA has sought details on Binance’s EU wind-down

European regulators have continued examining how the exchange is handling customers without a MiCA license.

ESMA recently contacted Binance seeking confirmation that the company was appropriately winding down its EU business, Bloomberg reported, citing people familiar with the communication. The authority declined to discuss an individual company and said national regulators are responsible for imposing sanctions over non-compliance.

Binance’s interpretation of reverse solicitation has become particularly relevant because the exemption depends on a customer initiating contact without being solicited by the provider.

Nina-Luisa Siedler, a lecturer at the Berlin University of Applied Sciences who advises companies on MiCA compliance, told Bloomberg that failing to receive a license does not automatically require Binance to close every account belonging to European customers.

“The fact that they did not obtain the license does not necessarily mean that they need to close all accounts they have for European customers,” Siedler said.

Restrictions have nevertheless remained in place in individual markets. Binance users in France lost access to trading after the July 1 deadline, including spot and margin trading, while withdrawals remained available.

The exchange’s app availability has varied across the bloc. In late July, the Binance app disappeared from Google Play in some EU countries, including reports from users in Spain and Latvia, while it remained available in Poland. Binance attributed the changes to updates in Google Play policies affecting crypto applications in certain markets.

Binance trading activity has held up despite MiCA restrictions

The regulatory setback has not substantially changed Binance’s position as the largest crypto exchange globally.

Kaiko data cited by Bloomberg showed Binance accounted for more than 45% of global spot crypto trading volume in late August. Its share of euro-denominated trading stood between 3% and 4%, a measure that does not capture every transaction involving European customers.

The euro trading share was not meaningfully different from levels recorded before the July 1 deadline, according to the report.

Binance has remained among the most downloaded crypto trading applications through Apple’s App Store in the EU, with its position showing little change over recent months.

Licensed competitors have entered the post-transition market under a different regulatory status. Coinbase and other approved providers can use MiCA passporting rights to offer covered services across EU member states, while Binance continues looking for another licensing route.

The exchange’s European difficulties follow its $4.3 billion settlement with U.S. authorities in 2023 over anti-money laundering, sanctions and unlicensed money transmission violations. Co-founder Changpeng Zhao separately pleaded guilty to failing to maintain an effective anti-money laundering program, served a prison sentence and was pardoned by U.S. President Donald Trump last year.

Binance has since increased its compliance spending and cooperation with authorities. In June, the exchange said its annual compliance spending reached $300 million and reported handling more than 313,000 law enforcement requests globally.

Its next MiCA application remains unresolved. Binance had been preparing to seek authorization from an EU member state other than Greece, according to Bloomberg, but the jurisdiction where it may file has not been confirmed.