Malta's MFSA Seeks Industry Input on DeFi Rules Under MiCA Framework

Malta's financial regulator has launched a consultation on how decentralized finance services can interact with the European Union's crypto rules under the Markets in Crypto-Assets (MiCA) framework.

The Malta Financial Services Authority (MFSA) published a discussion paper that examines whether some DeFi activities may fall within the scope of MiCA. The paper focuses on governance structures, accountability mechanisms, and the definition of full decentralization.

The MFSA stated that MiCA excludes crypto services that operate in a 'fully decentralized manner without any intermediary,' but many DeFi projects still maintain centralized features, including administrator keys, governance concentration, protocol upgrade authority, and control over user-facing interfaces.

The regulator asks whether decentralization should remain a binary concept or be assessed across a spectrum. The discussion paper also seeks views on adopting a standardized framework for determining when a protocol falls outside MiCA's scope.