Crypto Giant Binance is Struggling in Europe

The Netherlands and Belgium have closed their doors to the fair. Germany, Europe’s largest economy, has not yet licensed it to operate. And French prosecutors recently searched the exchange’s offices as part of an investigation into money laundering controls.

According to research firm Kaiko, Binance’s share of euro crypto trading has fallen to about 15% from more than 30% in January.

Regulators this year have shifted up a gear and increased scrutiny of crypto exchanges’ activities following the collapse of FTX.

The tougher stance from European regulators threatens to further shrink Binance’s footprint and force it to increasingly rely on markets in Asia, Africa and Latin America. Countries such as Vietnam, Turkey, India and Argentina already attract the most user traffic on Binance, although France, Germany and the Netherlands are in the top 25, according to May data from analytics firm CompareWeb.

The setbacks add to Binance’s woes in the US, where it is battling a lawsuit from the Securities and Exchange Commission and an ongoing criminal investigation from the Justice Department.

A Binance spokesperson said the company is focused on meeting the requirements of a new European Union law that is expected to take effect next year for digital asset companies in the 27 member states. In the meantime, he said, “we continue to work to proactively meet our requirements.”

Crypto companies are excited about the new EU law, called MiCA, as it allows companies authorized in one member state to offer services in all member states. But there are provisions for countries to ban crypto companies if their regulators believe there is a risk to their users, said Trenton Kennedy, a Chainalysis spokesperson.

While Binance remains by far the largest crypto platform in the world, its problems are taking their toll. Binance’s global market share for spot trading fell to 42% in June – the fourth consecutive month of declines from February’s peak of 57%, according to data provider CCData. The exchange said the end of zero-fee bitcoin trading contributed to the loss.

Founded by Changpeng Zhao in 2017, Binance grew at lightning speed as most regulators around the world remained on the sidelines.

When many countries started issuing warnings against Binance, Zhao vowed to get licensed and embrace regulation. In May 2022, Binance declared Paris as its first regional headquarters, after spending more than a year and a half trying to get registration approval in France.

“Having a G-7 country with a strict regulator sends a very strong signal to the other countries,” Zhao told The Wall Street Journal in an interview at the time.

However, Binance’s free-running past continues to haunt it.

French prosecutors are investigating the exchange for lack of money laundering controls and illegally offering services before Binance was registered, according to a statement from the Paris prosecutor’s office. Investigators took documents and electronics during the search, it added.

Binance’s spokesperson confirmed that authorities have visited the Paris office, but declined to comment “on the details of any law enforcement or regulatory investigations”.

Last month, the Belgian Financial Services and Markets Authority ordered Binance to stop offering services in the country because the exchange was doing so using companies outside the European Economic Area, which is prohibited. Days earlier, Binance said it would exit the Dutch market after failing to receive registration.

The exchange has also struggled to gain approval to operate in Germany, where BaFin, the market regulator, offers crypto custody licenses.

“We will continue to work to meet BaFin’s requirements,” Binance’s spokesperson said.

Seven companies currently have the BaFin license, including the American crypto exchange Coinbase.

Increased regulatory oversight in the US and elsewhere has spooked some banks and other companies that provide financial services for the stock market.

Last week, Paysafe, which supports euro transfers to and from Binance, said it would stop providing the service. It follows a move to discontinue pound sterling services it announced earlier this year.

Binance’s spokesperson said it would find a new provider so it can restart the service.