Malta’s financial regulator has issued a discussion paper outlining a potential legal framework for decentralized finance (DeFi), including recognition of decentralized autonomous organizations (DAOs), as European policymakers continue to grapple with how to regulate blockchain-based financial services.
On June 12, the Malta Financial Services Authority (MFSA) opened a public consultation on DeFi under the European Union’s Markets in Crypto-Assets (MiCA) regulation. The paper invites industry feedback through July 10 and proposes a new legal category for so-called “software-based organizations,” which would encompass DAOs and other software-governed DeFi entities.
Rather than treating DAOs as a standalone legal concept, the MFSA suggests recognizing them as a type of software-based organization, separating the legal framework governing the organization itself from the rules governing the underlying protocol and software.
The discussion paper builds on Malta’s long-standing role in the digital asset industry, having introduced one of the region’s first comprehensive crypto regulatory frameworks in 2018. While stressing that fully decentralized services generally fall outside MiCA’s scope, the regulator argues that many DeFi projects retain centralized features that complicate claims of decentralization and raise questions about regulatory accountability.
“MiCA excludes fully decentralised models from its regulatory scope, meaning that projects without intermediaries or central control may not need to comply with MiCA,” the paper states.
The MFSA outlines the scope of the DeFi discussion paper. Source: MFSA
Related: DAOs may need to ditch decentralization to court institutions
EU regulators increasingly turn attention to DeFi
Malta’s discussion paper comes amid a broader push across the European Union to clarify how decentralized finance and decentralized autonomous organizations should be treated under MiCA.
In March, a European Central Bank working paper found that governance and control across four major DeFi protocols remained highly concentrated, suggesting many projects may struggle to qualify as “fully decentralized” and therefore fall outside MiCA’s scope.
The debate continued in May, when the European Commission launched a targeted review of MiCA seeking feedback on issues including stablecoin interest payments, the treatment of DeFi and whether gaps in the framework warrant additional regulation.
However, not everyone believes a new DeFi rulebook is necessary. Speaking to Cointelegraph at the WAIB Summit Monaco earlier this month, European Commission adviser Peter Kerstens said policymakers should prioritize integrating tokenization into a broader digital asset framework rather than pursuing a second version of MiCA focused on DeFi.
European Commission adviser Peter Kerstens (right) speaks with Cointelegraph’s Zoltan Vardai. Source: WAIB Summit 2026
Related: Crypto firms face July 1 EU cutoff as MiCA grace period ends