Binance co-CEO Richard Teng says the EU’s Markets in Crypto-Assets (MiCA) rules are backfiring, with most departing users moving funds into self-custody rather than to licensed rivals.

Speaking at the Reuters NEXT Asia summit in Singapore, Teng said 70% of funds withdrawn by affected EU users went to self-hosted wallets. Only 30% moved to platforms licensed under the new regime.

Binance Withdrew its MiCA Bid Before the July Deadline

Binance stopped serving new EU customers on July 1 after pulling its MiCA license application in Greece in late June. Teng said the approval was repeatedly delayed without explanation, so the company withdrew to avoid a rushed transition for users.

The exit forced existing customers to decide where to move their balances, and it coincided with its heaviest weekly outflows in more than three years. Binance’s own data on those flows now anchors Teng’s critique.

The debate lands as European authorities examine how the rules work in practice, including a MiCA custody review opened this week. Analysts have said enforcement, not the text, will be the framework’s real test.

Teng Warns Self-Custody Carries the Bigger Risk

Teng, a former regulator, argued that pushing users toward self-hosted wallets undercuts the protection MiCA was meant to deliver. Exchanges run anti-money-laundering (AML) and know-your-customer (KYC) checks that non-custodial wallets do not.

“Once it goes into a self-hosted wallet, the risks actually amplify. You don’t have proper AML and KYC controls over those,” Richard Teng, Binance co-CEO, said.

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He said regulators gain more by licensing compliant firms than by driving activity beyond their view. Binance has since been invited to apply in other EU jurisdictions and says it remains committed to the region.

Supporters of self-custody read the same numbers differently. Holding private keys removes the counterparty risk exposed by past exchange failures, and many users treat direct control as a core feature rather than a loophole.

Similar arguments have reached Washington, where non-custodial wallet providers asked US regulators to spare self-custodial software from legacy rules.

Regulators are not blind to these transfers either. Europe’s expanding crypto travel rule already pushes exchanges to collect data on transactions involving self-hosted wallets.

Whether the split reflects a temporary reaction to Binance’s exit or a lasting turn toward self-custody will shape how regulators judge MiCA’s first results. The coming licensing decisions should provide the first hard evidence.

Source: BeInCrypto