Malta Regulator Weighs MiCA's Impact on Decentralized Finance

The Malta Financial Services Authority (MFSA) has started consulting on regulating DeFi projects. This move comes as part of an effort to understand and apply the Markets in Crypto-Assets (MiCA) regulation, which aims to provide a framework for cryptocurrency companies operating within the EU.

According to MFSA's proposal, decentralization should not be seen as a binary attribute but rather on a spectrum. Protocols that exhibit centralized elements such as administrative keys, concentrated governance, update rights, and control over user interfaces may fall under the scope of MiCA.

The regulator also seeks input from market participants on whether regulated crypto companies should conduct smart contract audits, governance checks, and risk assessments before integrating DeFi protocols.