Cardano Foundation opposes EU's plans to extend MiCA regulations to DeFi and staking services
The Cardano Foundation argues that noncustodial staking mechanisms warrant separate treatment from intermediary-based services as European Union officials weigh modifications to cryptocurrency regulation.
The Cardano Foundation has called on the European Union to refrain from developing new, separate regulatory frameworks specifically targeting decentralized finance and staking activities, making the case that current financial regulations should apply to these operations based on the functions they perform and the risks they present, rather than the underlying technology employed.
Through a blog post published on Wednesday detailing its comprehensive 19-page document submitted to the European Commission on Sept. 30, the foundation advocated for making a clear differentiation between direct involvement in decentralized networks and financial service offerings delivered by intermediary entities, especially those that involve holding custody or exercising control over clients' digital assets.
Regulation should follow the substance of an activity, the functions performed, and the risks created, not the technology through which it is conducted.
Cardano Foundation
According to the foundation, participants in the Cardano network have the ability to delegate their native ADA (ADA) tokens for the purpose of network security without relinquishing custody or having their tokens locked up, maintaining that this form of direct network participation deserves different regulatory treatment compared to staking service offerings managed by intermediary platforms.
The document further advocated for more precise boundaries between the European Union's Markets in Crypto Assets Regulation (MiCA) and pre-existing financial legislation, cautioning that duplicative regulatory demands and varying interpretations among member states have the potential to generate confusion and uncertainty for cryptocurrency enterprises operating in the region.
This position statement from the foundation arrives at a time when European Union regulatory bodies are evaluating the expansion of supervision over cryptocurrency-related services. During September, the European Securities and Markets Authority (ESMA) put forward recommendations for enhanced protective measures covering staking, lending and borrowing activities, alongside proposing a novel regulated service classification for companies that facilitate access to DeFi protocols.
Beyond its engagement with European authorities, the Cardano Foundation has similarly advocated for improved regulatory definition in the United States, collaborating with five additional blockchain organizations in submitting an Oct. 20 correspondence to the US Securities and Exchange Commission requesting formal acknowledgment of digital commodities as non-securities within the framework of its proposed cryptocurrency regulations.