MFSA Seeks Input on DeFi Regulation under MiCA Framework

Malta's financial regulator is exploring how decentralized finance (DeFi) fits into the European Union's Markets in Crypto-Assets (MiCA) framework.

The Malta Financial Services Authority (MFSA) published a discussion paper on Wednesday, seeking feedback on whether decentralization should be assessed as a spectrum rather than a binary concept.

The regulator notes that while MiCA excludes cryptocurrency services provided in a fully decentralized manner without any intermediary, many DeFi projects retain centralized features such as administrator keys and governance concentration.

The MFSA is asking for input on whether regulated crypto firms should be required to conduct smart-contract audits, governance reviews, and risk assessments before integrating DeFi protocols into their services.