The recent exclusion of decentralized finance (DeFi) and nonfungible tokens (NFTs) from the Markets in Crypto Assets (MiCA) regulations has raised alarms in the blockchain industry. Industry advocacy group, the Association for Financial Markets in Europe (ASME), is leading the charge in questioning the move.
MiCA, set to take effect in December 2024, is an unprecedented attempt at comprehensive crypto legislation. It aims to establish a standardized framework for the thriving crypto-asset markets in the European bloc. However, the notable exclusion of certain critical aspects, such as DeFi and NFTs, from its ambit, has left industry participants concerned.
ASME, in its paper addressed to the European Council, warns against potential risks to financial stability and potential knock-on impacts from the exclusion of DeFi. While the overlap of DeFi and Traditional Finance (TradFi) is currently minimal, ASME advocates for proactive monitoring and management to rule out any unforeseeable financial disruptions.
In addition, ASME calls for creating a taxonomy for DeFi activities and digital assets as part of a consistent regulatory framework. Their proposed framework would apply to different levels of centralization existing within the decentralized ecosystems.
However, ASME also astutely insists that this should not be taken as a final resolution. Instead, they suggest it as an initial proposal, a prompt for further discussions on technical issues presented by this novel area of digital finance. Moreover, they intend to catalyze initial proposals on how DeFi could be approached from a regulatory standpoint.
The trade body’s objective with these recommendations is two-fold. Firstly, they aim to initiate an industry-wide discussion on this topic, and secondly, to work out innovative policy solutions for DeFi in collaboration with both the public and private sectors.
The MiCA regulation is still in its consultation stage, which is expected to commence in July. As part of the process, the European Union will launch a three-part consultation process. The European Commission, European Parliament, and European Council will be subject to approval of measures and suggestions gathered during the consultation phase. The focus now, however, is on ensuring a comprehensive and inclusive regulatory framework that can adequately cater to all aspects of the rapidly-evolving crypto-asset markets.
Source: Cointelegraph
