EU regulators are questioning Binance over how it keeps serving European customers through an Abu Dhabi-licensed entity.
Binance was previously told to shut down its EU business after it failed to win a license under the Markets in Crypto-Assets rulebook (MiCA).
Why are EU regulators questioning Binance?
ESMA and national regulators in France, Germany and Greece are examining Binance’s reliance on a licensing exemption to continue offering its services to EU customers after it failed to get approval for a MiCA license. Some regulators have asked the company for information and enforcement action, including fines, is on the table if they are not satisfied.
Binance is currently serving some of its EU customers through an Abu Dhabi licensed entity. Firms that did not get approved for a MICA license were supposed to begin winding down EU operations from July 1 and stop serving clients except to help them move or sell their holdings, but the exchange has been able to continue operating in the EU due to a legal exemption called reverse solicitation.
This exemption lets a firm based outside the EU serve an EU client only when that client sought out the service entirely on their own and without being marketed to.
ESMA has said the exemption “should be regarded as the exception,” not a workaround. The Dutch regulator AFM warned that providers “cannot simply claim reverse solicitation.”
What is reverse solicitation?
Reverse solicitation has existed long before crypto rules emerged. The exemption was carried over from MiFID II, the EU’s framework for investment services.
When the UK left the EU’s financial system on 31 December 2020, ESMA issued a public statement in January 2021 warning firms against abusing reverse solicitation. The regulator called out tricks like marketing to EU citizens and then having them tick a box saying “I came to you myself.”
Offshore contracts-for-difference (CFD) brokers have also used the same reverse solicitation trick to reach EU retail traders and offer them a high leverage that EU rules would otherwise restrict.
Binance is the largest name to be caught in the exemption’s gray zone, and the exchange already carries a heavy record. For instance, it was smacked with a $4.3 billion fine in 2023 when it pleaded guilty to money-laundering and sanctions-related charges.
Binance says it complies with local requirements where it operates and is “actively working toward becoming MiCA-authorised.” The exchange’s own licenses in France, Spain and Poland have become invalid under MiCA.
The smartest crypto minds already read our newsletter. Want in? Join them.
This articles is written by : Nermeen Nabil Khear Abdelmalak
All rights reserved to : USAGOLDMIES . www.usagoldmines.com
You can Enjoy surfing our website categories and read more content in many fields you may like .
Why USAGoldMines ?
USAGoldMines is a comprehensive website offering the latest in financial, crypto, and technical news. With specialized sections for each category, it provides readers with up-to-date market insights, investment trends, and technological advancements, making it a valuable resource for investors and enthusiasts in the fast-paced financial world.