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Malta Examines Rules for Partly Centralized DeFi Projects Under MiCA

The Maltese regulator is looking at whether partly centralized DeFi projects could still fall under MiCA. The consultation is meant to bring more clarity to the line between truly decentralized and regulated.

By Mike Hesp
• 1 min read
Malta Examines Rules for Partly Centralized DeFi Projects Under MiCA

Key Takeaways

  • The MFSA is looking into whether partly centralized DeFi projects could fall under the European MiCA rules.
  • The regulator sees central features in many DeFi projects, such as admin access, concentrated governance, and control over user interfaces.
  • The consultation runs until July 10 and is meant to bring clarity to DeFi regulation within the EU.

The Malta Financial Services Authority (MFSA) is looking into whether certain forms of decentralized finance (DeFi) could fall under the European MiCA rules. While MiCA explicitly excludes services that are offered in a fully decentralized way and without intermediaries, Maltese regulators say many DeFi projects still have central features, such as admin access, concentrated governance, and control over user interfaces.

Looking at Decentralization as a Spectrum

In a recently published discussion paper, the MFSA is asking for feedback on whether decentralization should be seen more as a spectrum instead of a yes-or-no trait. That matters because MiCA does not give a clear definition of what exactly counts as 'fully decentralized.' The regulator is also considering the development of a standardized framework to decide when a protocol falls outside MiCA's scope. That could give both regulators and DeFi developers more clarity.

Requirements for Regulated Crypto Companies

The MFSA is also asking whether regulated crypto companies should be required to carry out smart-contract audits, governance reviews, and risk analyses before integrating DeFi protocols into their services. That could improve security and transparency, given how complex and sometimes opaque many DeFi projects are.

The paper also discusses possible legal structures for DeFi initiatives, such as decentralized autonomous organizations (DAO's) and segregated cell companies. The MFSA also introduces the idea of guardian agents: automated mechanisms that monitor and limit the behavior of autonomous systems to make sure they stay within preset goals and risk tolerances.

The consultation is open for responses until July 10. This move by the MFSA could be an important step toward clarifying the regulatory framework around DeFi in the EU, where the current rules still leave room for interpretation and uncertainty.

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