European regulators are reportedly examining Binance's reliance on a legal exemption to continue serving customers in the European Union without authorization under the bloc's crypto rules.

According to a report by the Financial Times published on Thursday, the European Securities and Markets Authority (ESMA) and regulators in France, Germany and Greece are reviewing Binance's use of reverse solicitation under the Markets in Crypto-Assets Regulation (MiCA).

Binance withdrew its Greek MiCA application in June, saying it would instead seek authorization in another EU member state. Under MiCA, authorization in one member state allows a firm to offer crypto services across the entire bloc, which is why the choice of home regulator carries weight for large platforms. On Sept. 18, the exchange told Cointelegraph that it continues to pursue MiCA authorization and remains committed to operating in Europe on a long-term compliant basis.

Reverse solicitation under scrutiny

Citing a person familiar with the matter, the FT reported that Binance is relying on reverse solicitation to keep serving some EU customers. The exemption allows non-EU crypto asset service providers (CASPs) to serve clients who approach them entirely on their own initiative, but ESMA's guidelines stress that companies cannot use it to circumvent MiCA requirements. How strictly that line is enforced matters now that MiCA's transitional period has ended: for non-EU platforms serving EU users without authorization, the interpretation of this exemption is pivotal.

Ahead of the end of MiCA's transitional period on July 1, Binance told Cointelegraph that EU access would depend partly on a user's jurisdiction, account status and "servicing entity." Some EU traders are now being served through Binance's Abu Dhabi-regulated entity, according to the FT.

Binance did not confirm whether it is in talks with EU regulators, telling Cointelegraph only that it "complies with applicable regulatory requirements."

ESMA pushes for stronger enforcement powers

On Wednesday, ESMA called for stronger powers over non-EU companies that solicit European investors without MiCA authorization in its response to the European Commission's consultation on reviewing the regulation. The authority said its proposals would support faster, more consistent supervisory action across the EU and reduce opportunities for companies to exploit regulatory differences.

The push follows comments from ESMA Chair Verena Ross, who said Monday that the regulator's MiCA focus had shifted "from rulemaking towards supervision and convergence."

Binance absent from ESMA's non-compliant list

ESMA's register of non-compliant crypto providers grew from 164 entries on July 16 to 173 in its Sept. 30 update. Binance does not appear on the latest register, which MiCA describes as "non-exhaustive" and which ESMA updates based on information from national authorities and other sources.

ESMA told Cointelegraph that it does not comment on specific cases, adding that supervision, investigation and enforcement of crypto asset service providers under MiCA are handled by national authorities. It also said the information in its MiCA register is provided by national competent authorities, with entries reflecting information received from the relevant authorizing or notified regulator.

Germany's Federal Financial Supervisory Authority (BaFin) declined to provide further information, citing legal confidentiality obligations. The French and Greek watchdogs had not responded by publication. Their responses, along with how the Commission weighs ESMA's proposals in its review, are the near-term developments to watch as the scrutiny unfolds.

The original report was published by Cointelegraph.