coindesk.com
Malta's financial regulator is exploring how decentralized finance (DeFi) could fit within the European Union's Markets in Crypto-Assets (MiCA) framework, focusing on governance, accountability and the meaning of "full decentralization."
The Malta Financial Services Authority (MFSA) said that while MiCA excludes cryptocurrency services provided in a "fully decentralised manner without any intermediary," many DeFi projects retain centralized features such as administrator keys, governance concentration, protocol upgrade rights and control over user-facing interfaces, in a discussion paper published Wednesday.
The regulator is seeking feedback on whether decentralization should be assessed as a spectrum rather than a binary concept and whether a standardized framework should be developed to determine when a protocol falls outside MiCA's scope.
DeFi is something of a grey area under the EU's framework for regulating crypto, as it excludes services provided in a fully decentralised manner, but lacks a clear description of when a protocol or platform meets that threshold.
MSFA's paper also asks whether regulated crypto firms should be required to conduct smart-contract audits, governance reviews and risk assessments before integrating DeFi protocols into their services.
Beyond MiCA, the MFSA outlines potential legal structures for DeFi projects, including decentralized autonomous organizations (DAOs) and segregated cell companies.
It also examines guardian agents, which it defines as mechanisms with a degree of automation that "monitor, evaluate, and constrain the behaviour of other autonomous systems to ensure compliance with predefined objectives and risk tolerances."
The discussion paper is open to public responses until July 10.