DeFi
European DeFi protocols face potential regulatory review from the European Commission
European DeFi protocols face potential regulatory review by European Commission
Decentralized finance (DeFi) protocols operating in Europe may soon face new regulations. This is in line with regulations set out under the Markets in Crypto Assets (MiCA) Framework, which oversees digital assets in the region. The European Commission is required to produce a report by December 30, 2024, assessing the DeFi market and implementing specific regulations.
The aim of the report is to examine how decentralized systems, particularly those that do not have a clearly identified issuer or service provider, should be regulated. To carry out this report, the Commission launched various actions, including a study on integrated supervision. However, no political decision has been taken at this stage, according to a Commission spokesperson.
DeFi represents a shift toward peer-to-peer financing facilitated by decentralized technologies built on blockchain. While conventional financial laws often focus on regulating intermediaries such as banks or financial service providers, decentralized systems operate without these intermediaries.
Another potential avenue for DeFi regulation could emerge through the Financial Action Task Force (FATF). In specific cases, the FATF proposes that persons or entities with significant control or influence over DeFi arrangements be classified as virtual asset service providers (VASPs). This classification would apply even if the arrangements appear to be decentralized, highlighting the complexity of defining and regulating DeFi activities.