EU regulators are questioning Binance over how the exchange continues to serve European customers through an Abu Dhabi-licensed entity, in what is shaping up as the first major test case under the Markets in Crypto-Assets (MiCA) rulebook, according to a report by the Financial Times.

Binance was previously told to shut down its EU business after it failed to win a license under MiCA, the EU's licensing regime for crypto-asset service providers that became fully applicable at the end of 2024. The European Securities and Markets Authority (ESMA) and national regulators in France, Germany, and Greece are now examining the company's reliance on a licensing exemption to keep offering services to EU customers following its failure to secure MiCA approval. Some regulators have requested information from Binance, and enforcement action, including fines, is on the table if they are not satisfied.

The exchange currently serves some of its EU customers through an Abu Dhabi-licensed entity. Firms that did not obtain MiCA approval were supposed to begin winding down EU operations from July 1 and to stop serving clients, except to help them move or sell their holdings. Binance has been able to continue operating in the bloc through a legal exemption known as reverse solicitation, which allows a firm based outside the EU to serve an EU client only when that client sought out the service entirely on their own initiative and without being marketed to.

ESMA has said the exemption "should be regarded as the exception," rather than a workaround, while the Dutch regulator AFM has warned that providers "cannot simply claim reverse solicitation." Because this is the first major test of the exemption under MiCA, how narrowly regulators read it in Binance's case could set the practical boundary for other non-EU crypto firms relying on the same route to reach EU customers.

What is reverse solicitation?

The exemption long predates crypto regulation and was carried over from MiFID II, the EU's framework for investment services. After 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 singled out tactics such as marketing to EU citizens and then having them tick a box confirming "I came to you myself."

Offshore contracts-for-difference (CFD) brokers have used the same maneuver to reach EU retail traders and offer leverage levels that EU rules would otherwise restrict Binance is the largest company to be caught in the exemption's gray zone, and the exchange already carries a heavy record: in 2023, it paid a $4.3 billion fine after pleading guilty to money-laundering and sanctions-related charges.

Binance says it complies with local requirements in the markets 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, whose passporting rules allow a firm authorized in a single member state to offer services across all 27 EU countries.