Blocked in Europe, Binance claims 70% of withdrawals went to personal wallets

New European regulations for the crypto market have blocked Binance in the bloc, and users have started leaving the platform. However, the world's largest exchange maintains that a significant portion of the funds is going to self-custody wallets, where individuals control their cryptocurrencies without an intermediary company. It is estimated that up to 70% of the money withdrawn from the platform recently in Europe has followed this path.

According to the exchange, this is the collateral effect of a rule that aimed to bring the crypto market into a more controlled environment, rather than pushing people out of it. "Restricting access to Binance does not make crypto activity disappear. Users migrate to other places and, in many cases, seem to be migrating outside the regulated perimeter, where there may be fewer safeguards, less customer support, limited recovery options, and less visibility for authorities," Binance states.

Europe has begun requiring all crypto exchanges to have a license to operate in the bloc, following the so-called MiCA (the English acronym for Markets in Crypto-Assets). Those who did not obtain authorization by July 1 would have to cease their activities in the region. Binance did not manage to secure the license in time.

The company applied for authorization in Greece in January but withdrew at the end of June after months of analysis that also involved regulators from Ireland and Latvia. As a result, starting in July, the exchange stopped accepting new European clients and suspended services such as trading, deposits, and interest-earning applications. Users can still withdraw what they have and close positions. The company says it will now try to obtain the license through France.

According to the Wall Street Journal, the European authority overseeing the markets, ESMA, advised regulators in each country to reject Binance's application due to failures in combating money laundering. The company's past also weighs heavily: in 2023, Binance admitted to violating anti-money laundering and sanctions rules in the United States, resulting in a $4.3 billion settlement, and its founder, Changpeng Zhao, even served time in prison. In France, the exchange is still under investigation for suspected money laundering. Binance's head in Europe, Gillian Lynch, contests the reports and states that the company remains committed to the region.

The exchange argues that a company behind the platform can identify suspicious movements, assist customers when something goes wrong, and cooperate with the police, while self-custody wallets do not provide this intermediary. "The goal should be to keep users on responsible and well-supervised platforms that have scale, controls, and the capacity to protect users and support authorities," the statement says.

In Brazil, the Central Bank has also been tightening regulations for cryptocurrency exchanges, which must submit a mandatory operating authorization request by October 30. Additionally, the agency restricted the use of stablecoins, cryptocurrencies pegged to the dollar, for exchange operations, and in June warned banks and funds that it considers certain structures set up to import crypto assets illegal, which increased the cost of these operations overnight. There is also a proposal under study to hold stablecoin transfers above $10,000 sent to personal wallets or outside the country for up to 24 hours to check for signs of money laundering.

The sector itself warns that overly strict regulations could shift part of the activity to the parallel market and self-custody, the same risk that Binance points out in Europe. On the other hand, the regulator bets that bringing these operations into a supervised environment, even if it pushes some players away, better protects the system in the long run.

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