Binance, the world's largest cryptocurrency exchange by trading volume, is facing a coordinated European Union regulatory investigation into its reliance on MiCA's "reverse solicitation" exemption to serve European customers without authorization.

The European Securities and Markets Authority (ESMA), together with national regulators in France, Germany and Greece, is reviewing whether Binance has applied the exemption appropriately, the Financial Times reported on October 1. Several regulators have already issued information requests to the exchange. If Binance's responses are judged insufficient, enforcement measures including fines could follow.

The legal question

Article 61 of the EU's Markets in Crypto-Assets regulation allows third-country firms to serve EU clients without a CASP license only when the client initiates the relationship entirely on their own initiative. The exemption fails if the operator engaged in any prior advertising or promotional activity targeting EU customers. Contractual language asserting that the customer acted on their own initiative does not satisfy the provision — regulators will examine the actual circumstances in which the relationship began.

ESMA told the FT: "The reverse solicitation exemption must be interpreted very narrowly. It should be considered an exception and must not be used to circumvent MiCA requirements."

To assess potential abuse, supervisors can weigh a range of indicators that a third-country firm is soliciting EU customers, including local phone numbers, country-specific website addresses, advertising activity and social media outreach.

Operating without a license

Binance entered July without the Crypto-Asset Service Provider authorization required to offer regulated services across the EU by the end-of-June deadline. The company had pursued authorization through Greece but withdrew its application on June 24, later announcing it would seek approval through another member state. Services to some European customers nevertheless continued.

Testing conducted in August, more than seven weeks after the deadline, confirmed that Binance still allowed new account openings in several European countries. New users could complete registration and identity verification, and some active accounts could deposit cryptocurrency. During this period, Binance did not appear on ESMA's register of authorized firms.

Access varied by jurisdiction and product. In France, spot and margin trading were blocked after July 1, while some markets operated under withdrawal-only restrictions.

Binance told the FT it is "actively working toward securing MiCA authorization" and complies with applicable regulatory requirements in the jurisdictions where it operates.

The Greek withdrawal

The circumstances of Binance's withdrawn Greek application drew scrutiny in September, when reports emerged that European Central Bank President Christine Lagarde had intervened with Greek officials during the process. Greek officials reportedly informed ESMA in early June that the Hellenic Capital Market Commission stood ready to approve the application. Binance pulled the filing on June 24.

What comes next

The probe arrives as ESMA shifts MiCA supervision into its enforcement phase. National supervisors have placed reverse solicitation among their 2027 supervisory priorities, alongside outsourcing, operational resilience, liquidity and whether firms maintain adequate operational infrastructure within the EU.

ESMA also plans to develop common risk indicators and reporting standards for national authorities supervising crypto-asset service providers. That work will feed into the European Commission's MiCA review scheduled by June 2027.

The case marks the first major test of how MiCA's exemption provisions function in practice. A narrow reading of reverse solicitation would carry broad consequences for any third-country crypto business that has used the exemption as a route into the European market without a license — and for Binance, the immediate question is whether its answers to regulators arrive before the enforcement window closes.