Europe plans to regulate decentralized finance (DeFi) starting in 2026, while lawmakers continue to struggle with defining decentralization under the Markets in Crypto-Assets (MiCA) framework. The MiCA regulation, effective from December 30, 2024, aims to enhance investor protection, combat fraud, and address stablecoin management. However, according to Vyara Savova from the European Crypto Initiative (EUCI), many questions regarding DeFi remain unresolved, placing it in regulatory limbo. DeFi protocols are theoretically outside MiCA's scope, but there is a lack of clarity on what EU policymakers mean by DeFi. Thus, a legal definition of decentralization is expected from mid-2026 onwards. MiCA's implementation has faced criticism for imposing traditional financial service requirements on DeFi platforms. While MiCA II updates have been ruled out, there may be legislative updates concerning stablecoins, indicating an ongoing evolution in European crypto regulation.

Source 🔗