Malta Regulator Considers Extending MiCA Oversight to Parts of DeFi

The Malta Financial Services Authority (MFSA) is inviting feedback on whether decentralization should be viewed as a continuum rather than a strict yes-or-no classification.

Malta’s financial regulator is examining how decentralized finance (DeFi) could be incorporated into the European Union’s Markets in Crypto-Assets (MiCA) framework, with particular attention to governance structures, accountability, and what constitutes “full decentralization.”

In a discussion paper released on Wednesday, the MFSA noted that while MiCA excludes crypto-asset services operating in a fully decentralized manner without intermediaries, many DeFi projects still contain centralized elements. These may include administrator keys, concentrated governance power, protocol upgrade controls, and authority over user interfaces.

The regulator is asking stakeholders whether decentralization should instead be evaluated along a spectrum and whether a standardized methodology is needed to determine when a protocol falls outside MiCA’s regulatory scope.

DeFi remains a grey area under the EU’s crypto rules, as the framework does not clearly define when a system is sufficiently decentralized to qualify for exclusion.

The MFSA also raises the question of whether regulated crypto firms should be required to carry out smart contract audits, governance reviews, and risk assessments before integrating DeFi protocols into their platforms.

Beyond MiCA, the paper explores possible legal structures for DeFi initiatives, including decentralized autonomous organizations (DAOs) and segregated cell companies.

It also introduces the concept of “guardian agents,” described as automated mechanisms designed to monitor, assess, and restrict the behavior of autonomous systems to ensure compliance with predefined rules and risk limits.

The consultation period for the discussion paper remains open until July 10.