MiCA Expansion on the Table as Malta Studies DeFi Regulation Approach

The Malta Financial Services Authority (MFSA) is seeking views on whether decentralization should be treated as a spectrum rather than a strict binary classification.

The regulator is assessing how decentralized finance (DeFi) could be brought under the European Union’s Markets in Crypto-Assets (MiCA) framework, with attention to governance models, accountability, and how to define “fully decentralized” systems.

In a discussion paper released Wednesday, the MFSA noted that while MiCA excludes crypto-asset services operating in a fully decentralized way without intermediaries, many DeFi protocols still retain centralized features. These can include administrator keys, concentrated governance control, protocol upgrade authority, and control over user interfaces.

The authority is asking whether a continuum-based approach would better reflect the reality of decentralization and whether standardized criteria should be developed to determine when a protocol falls outside MiCA’s scope.

It also highlighted ongoing uncertainty in EU regulation, as there is no clear threshold defining when decentralization is sufficient for exemption.

The MFSA further suggested that regulated crypto firms may need to carry out smart contract audits, governance assessments, and risk evaluations before integrating DeFi protocols.

Beyond MiCA, the paper examines potential legal structures for DeFi projects, including decentralized autonomous organizations (DAOs) and segregated cell companies.

It also introduces “guardian agents,” described as automated mechanisms designed to monitor, evaluate, and constrain autonomous systems to ensure compliance with predefined rules and risk limits.

The consultation remains open for feedback until July 10.