European Trade Body Urges Inclusion of DeFi in MiCA Regulations to Mitigate Risks
The Association for Financial Markets in Europe (ASME), an influential industry advocacy group representing wholesale market participants in Europe, has voiced its concerns over the exclusion of the decentralized finance (DeFi) sector from the markets in crypto assets (MiCA) regulations. ASME has called for the incorporation of DeFi within the comprehensive crypto legislation set to take effect in December 2024.
MiCA is regarded as a significant step towards establishing comprehensive regulations for the crypto industry. However, it currently omits certain aspects such as DeFi and non-fungible tokens (NFTs). In a paper submitted to the European Council, ASME highlighted that the exclusion of DeFi could potentially result in unintended risks to financial stability and have broader repercussions.
ASME emphasized the importance of including DeFi within the regulatory framework to address potential vulnerabilities and safeguard against systemic risks. The organization expressed concerns about the possibility of a regulatory gap that could be exploited by malicious actors, leading to financial instability and negative ripple effects throughout the financial ecosystem.
By urging the inclusion of DeFi in MiCA regulations, ASME aims to promote a balanced and comprehensive approach to regulating the evolving crypto landscape. The organization advocates for measures that strike a harmonious balance between fostering innovation and protecting market integrity and investor interests.
EU Urged to Establish DeFi Taxonomy and Regulatory Framework, says Trade Body
The Association for Financial Markets in Europe (AFME), a prominent trade body representing wholesale market participants, has recommended that the European Union (EU) develop a taxonomy for decentralized finance (DeFi) activities and digital assets using a risk-based approach. In order to govern the decentralized nature of DeFi, AFME proposed the implementation of a consistent regulatory framework that accounts for different levels of centralization.
Cointelegraph sought comments from AFME regarding the matter, but an immediate response was not received.
AFME emphasized that their proposal should be viewed as a starting point for discussions, aiming to establish a solid foundation for exploring the technical challenges associated with this emerging area of digital finance. Additionally, the trade body put forth initial suggestions on how DeFi could be addressed from a regulatory perspective. AFME aims to initiate an industry-wide dialogue and collaboratively develop innovative policy solutions for DeFi, involving both public and private sectors.
Currently, MiCA is in the consultation phase, during which the European Union plans to launch a three-part consultation process commencing in July. The proposed measures and recommendations gathered during this phase will subsequently undergo evaluation and approval by the European Commission, European Parliament, and European Council.