- New EU-wide crypto laws present a strategy for Binance.
- Binance can re-access markets that were previously shut off, experts tell DL News.
- Binance will need to apply for a MiCA licence in one EU country at the start of 2025.
- Then it will be able to use it in the rest of the bloc.
- Europe’s tense relationship with Binance is “the first MiCA nightmare.”
European regulators have slammed the doors shut for Binance’s expansion plans on the continent.
The latest setback for the world’s biggest crypto exchange came this week when news broke that Binance withdrew its crypto custody licence application in Germany, meaning it will no longer be permitted to target Germany’s population.
But there may be a way around for Binance to regain its footing in Europe.
In less than 18 months, the company will be able to apply for an EU-wide licence and regain access to the entire European market thanks to the Markets in Crypto-Assets framework set to replace national-level crypto legislation by the end of 2024.
Under MiCA, firms will be able to apply for one licence in one country and ‘passport’ it across the 27-nation bloc instead of the current state where firms must gain regulatory approval in each member state they want to operate in.
Once Binance gets hold of a MiCA licence — for which it can apply in its chosen EU country on the day the framework goes live on 1 January 2025 — its regulatory woes in other states may be washed away as new, uniform standards will apply.
“We will make any necessary changes to our business over the next 12 to 18 months to fully comply with MiCA, protect users and support innovation,” a Binance spokesperson told DL News, confirming the exchange’s withdrawal for a licence from Germany’s financial regulator, BaFin.
Binance cited changes in “global market and regulation” for the withdrawal. The intention to “apply for appropriate licensing” in Germany remains, the spokesperson said.
BaFin would have denied Binance a crypto custody licence, reports said in June.
Regulatory war on several fronts
The exchange’s decision to withdraw its German application could be part of its long-term strategy.
“Binance’s move can be seen as a strategic choice,” said Francesco Paolo Patti, an associate professor at Milan’s Bocconi University and member of the European Law Institute.
“Getting authorisation to operate in Germany has proven to be more difficult than in other countries,” he told DL News.
BaFin has only granted seven companies the green light to operate in the crypto sector so far. Others are working under transitional provisions.
“There are little surprises, but it will become day-to-day life”
— Stéphanie Cabossioras, Binance France executive director
Binance faces regulatory wars on several fronts. Both the Securities and Exchange Commission, and the Commodity Future Trading Commission have hit it with lawsuits in the US this year.
In May, Binance pulled out of Canada, blaming the decision on tougher new laws.
Things aren’t much better across the pond where the news from Germany follows Binance having pulled out of regulatory approval from Austria, failed to gain the Netherlands’ approval, was ordered to halt Belgian operations, and deregistered from the UK and Cyprus.
Its European banking partner, Paysafe, will stop providing withdrawals and deposits in September. In France, the Binance subsidiary is facing investigation into money laundering.
NOW READ: Investors pull $4bn from Binance as regulators and rivals close in
Analysts also expect the US Department of Justice to file its long-time coming criminal charges against the exchange any day now.
‘MiCA nightmare’
Europe’s tense relationship with Binance is “the first MiCA nightmare,” said an industry stakeholder close to the topic under the condition of anonymity.
If Germany, the Netherlands and others kicked the exchange out of their country, it is not with the intention to see it back in their markets in 18 months’ time, the source said. Binance will therefore test the coherence of the MiCA framework.
The European Securities and Markets Authority is the agency responsible for implementing the new crypto rules for firms offering crypto services.
“When it comes to big players like Binance, one area of attention for us is to make sure that the MiCA rules are implemented in a consistent way across member states,” Benjamin Burlat, senior policy officer on the digital finance and innovation team at ESMA, said earlier this month.
NOW READ: The next job for EU regulators: making sure Binance and other crypto giants don’t game MiCA
Last year, Binance ticked off regulatory approval in many countries around the world and in Europe.
“Before having clarity on the timeline for the MiCA implementation it could make sense to try to get an authorisation to operate in every European country,” Patti said.
Now, it is a better strategy for firms to single down “key jurisdictions in which they plan to apply for MiCA authorisations.” Then, they can make use of the passporting regime.
Eyes on Binance France
A number of sources point to France as a potential access point to the European market under MiCA. Binance was the first major, international crypto platform to register in France in 2022, naming it its regional hub.
The French subsidiary is registered with the financial markets authority, the AMF. Its first financial statements published last week show Binance holds over €1 billion in crypto assets for its users.
However, Binance France is not immune to the regulatory turmoil.
The Paris public prosecutor is investigating Binance since June for “the unauthorised practice of the profession of virtual assets service provider” and “aggravated money laundering.”
Binance France executive director Stéphanie Cabossioras said that the probe is no reason to wrap up operations in the country, and is a normal aspect of being a regulated entity.
The authorities’ investigation into Binance comes with the maturing of the young crypto industry as it levels with the traditional financial sector, she added.
“There are little surprises, but it will become day-to-day life,” Cabossioras said at a recent Paris event.