Melker Bengtsson
TL;DR
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Binance has been serving EU residents under MiCA's reverse solicitation exemption since it withdrew its license application in Greece.
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According to the Financial Times, France, Germany, Greece and ESMA are examining whether it's actually following the rule.
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The burden of proof is on the firm, and it's a hard thing to prove. Fines are on the table.
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If the "they came to us" defence holds, it'll allow more exchanges to start offering their services again.
Since July, Binance has reportedly been operating in the EU via MiCA's reverse solicitation exemption. After it withdrew its license application in Greece, the world's largest exchange has been unable to serve EU residents, other than a narrow set of services. But there's an exemption in MiCA: reverse solicitation. It says that if the customer comes to the exchange entirely on their own initiative and requests a service, it's allowed to offer it.
Binance's Reading of the Exemption
Binance has been serving EU residents under this exemption. According to the Financial Times, regulators are now asking whether it's actually following the rule, and some have requested information from the exchange. France, Germany and Greece as well as the European Securities and Markets Authority (ESMA) are said to be examining the issue.
In a comment to the Financial Times, ESMA said: The reverse solicitation exemption should be understood as very narrowly framed.
Binance's reading of the exemption seems to differ from the one regulators are making. The exchange has reportedly let Europeans who have voluntarily come to it open and fund accounts. However, under ESMA's guidelines, that's too wide an offer. A firm can only serve a specific product to those users, the one they've requested.
Binance says it's following the rules where it operates. And, while it's currently operating in the EU under the reverse solicitation exemption, with some trading reportedly routed through an entity in Abu Dhabi, it's actively pursuing an EU license. In a statement to the Financial Times, it says: We are actively working toward becoming MiCA-authorised.
The Burden of Proof Is on Binance
The burden of proof is on the firm. And it's a hard thing to prove. It needs to show that a user came to its application entirely on their own initiative, without any prior solicitation, and is only being served the product they requested.
Additionally, any signup that's a result of marketing is not allowed under the exemption. ESMA's guidelines make no exception for past marketing. So, if someone who signs up has seen Binance marketing, they may not be able to be offered Binance services. This has not been tried before, so it's unclear what actually applies.
The reverse solicitation exemption was included in ESMA's 2027 supervision priorities. The actual enforcement of the rule lies with national regulators, not with ESMA. According to the Financial Times, fines are on the table if Binance is found to have breached MiCA. No timeline has been given.
This is surely being closely followed by other exchanges that failed or chose not to get an EU license by July 1. If the "they came to us" defence holds, it'll allow more exchanges to start offering their services again.
If that defence does hold up, it's a big blow for MiCA, and the July 1 deadline will have regulated marketing more than the actual exchange operations.
