Binance Faces EU Scrutiny Over Continued Operations Post-MiCA License Failure
European Union regulators are reportedly scrutinizing Binance, the world’s largest cryptocurrency exchange, over its continued service to some European customers, leveraging a legal exemption after failing to secure a crucial Markets in Crypto-Assets (MiCA) license. The exchange could face enforcement action if its interpretation of the rule is rejected.
The Financial Times, citing individuals familiar with the matter, reported that the European Securities and Markets Authority (ESMA) and regulators in France, Germany, and Greece are examining whether Binance qualifies for MiCA’s “reverse solicitation” exemption.
Binance was previously ordered to wind down its EU operations this summer after its failure to obtain a license. Under the regulations, unlicensed firms were required to take “immediate steps” to cease operations from July 1, with the exception of assisting customers in transferring or selling their holdings.
In June, Binance had stated it had been working with regulators for approximately 18 months and had not received any formal indication of rejection. However, the exchange later withdrew its application in Greece and indicated it would seek authorization in another member state.
A separate report from the Wall Street Journal alleged that European Central Bank President Christine Lagarde personally urged Greek Prime Minister Kyriakos Mitsotakis to block Binance’s application, even after Greek regulators had largely approved it. The application had cleared its technical review by early June, with the mandatory 40-day assessment period concluding without objections. Lagarde’s concerns reportedly stemmed from Binance’s prior guilty plea to U.S. money-laundering and sanctions violations, and a worry that its approval could encourage a shift towards dollar-denominated stablecoins while the ECB is developing its own digital euro.
The day before the Financial Times report, ESMA publicly stated that European regulators should be granted enhanced powers to enforce MiCA. According to Reuters, ESMA seeks the authority to order crypto companies to freeze assets when there are reasonable grounds to suspect criminal links, arguing that current procedures are too slow, often allowing suspicious assets to disappear before a freeze can be implemented.
National regulators could also gain the ability to remove websites associated with scams or unauthorized crypto firms, and to take action against non-EU companies that actively solicit investors within the EU without proper authorization.
ESMA has also proposed a ban on certain misleading marketing tactics, the introduction of rules for third-party marketing, and the requirement for full cost disclosures to customers. These proposals are part of ESMA’s response to a consultation on MiCA, which is currently under review. A consortium of European central banks released its own response last week, and Reuters noted that some regulators have expressed concerns about inconsistencies and uneven enforcement of the MiCA rules.
