New EU rules may ban non-decentralized Defi protocols in 2025

The authorities in the European Union (EU) are reportedly working on a new set of rules & laws to regulate Defi protocols. 

The European Union (EU) is a union of 27 European countries, fostering peace and economic cooperation. The Markets In Crypto Assets (MiCA), the regulatory framework that governs digital assets within the region, currently regulates the crypto sector in the majority of the EU member countries. 

As per MiCA’s measure, the European Commission is required to prepare a report by 30 Dec 2024 evaluating the decentralised finance (DeFi) market and the feasibility of specific regulations for the sector. 

An official from the Commission shared some key details on the report with popular crypto news media Cointelegraph. The official said that they are examining the Defi protocols & preparing a way to regulate the Defi protocols. 

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The shared key details regarding the report on the Defi sector hinted that ban measures could be taken by the EU authorities against those Defi protocols which are actually not decentralised.

Maxim Galash, CEO of CoinChange Financials, shared his analysis of the EU report on the Defi sector and noted that they’re focused on the regulation of crypto-asset lending and borrowing, a core activity within the DeFi space.

European Union (EU) Commission are working on a report to regulate Defi protocols & linked financial activities e.g. liquidity pool, borrowing & lending funds, etc

— Bitcoinik (@Bitcoinikdotcom) April 5, 2024

MakerDAO co-founder Rune Christensen also shared his personal opinion on these regulatory activities around the Defi sector and said that such efforts may end up creating new crypto licensing requirements for Defi protocols.

Furthermore, he said that all such things will lead to the existence of only two types of crypto platforms, either fully decentralised or fully KYC-enabled platforms.

Heard today that there’s a good chance all EU national financial regulators will interpret DeFi frontends to require a MiCA license. This would make DeFi frontends on normal internet domains, as we know them today, impossible. Only fully decentralized, local, downloaded frontends…

— Rune (@RuneKek) April 3, 2024

It is worth it to know that over the past few years, just after the Russia vs Ukraine conflict, many Defi crypto exchanges faced criticism for their service restrictions as a part of Western financial restrictions against the Russian foundation. 

Read also: Ripple plans to launch US dollar-pegged stablecoin

New EU rules may ban non-decentralized Defi protocols in 2025

 

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