Malta consults on DeFi and MiCA regulation

MFSA seeks feedback on DeFi’s place in MiCA, exploring decentralization, audits, and a standardized framework. Industry responses are due by July.

The Malta Financial Services Authority (MFSA) has released a consultation paper examining how decentralized finance (DeFi) could fit within the European MiCA (Markets in Crypto-Assets) regulatory framework. While MiCA currently excludes services that are 'fully decentralized without intermediaries,' the MFSA notes that many DeFi projects still have centralized features, such as admin keys, governance controls, protocol upgrade rights, and oversight of user interfaces. The MFSA is seeking industry input on whether decentralization should be seen as a spectrum rather than a binary state. It is also considering the development of a standardized framework to determine when a DeFi protocol is sufficiently decentralized to be exempt from MiCA regulation. Additionally, the regulator is requesting feedback on possible requirements for audits and risk assessments for DeFi projects. Industry responses are invited by July.