DeFi

Union

Stronger

Aave

Cardano

The Cardano Foundation believes that the European Union (EU) must address the existing challenges related to MiCA before introducing new regulations pertaining to decentralized finance (DeFi) and staking. It made these comments in a <a href="https://cardanofoundation.org/blog/mica-review-consultation-response" rel="noopener noreferrer nofollow">statement released on October 21</a> and insisted that being on a public blockchain does not automatically mean serving as a financial services provider.
<h3 class="wp-block-heading" id="strong-delegation-strong-without-strong-surrendering-custody-strong">Delegation without surrendering custody</h3>
In its <a href="https://ucarecdn.com/e951de87-1e75-4e88-ada4-e07cfb3eb771/" rel="noopener noreferrer nofollow">September 30 response</a> to the European Commission’s consultation, the Foundation opposed the introduction of separate regulations for DeFi and staking. Rather, it asked the EU to apply the existing legislative framework to those that offer any financial services or manage customer assets. It additionally cautioned that regulating blockchain infrastructure merely on the basis of its enabling of financial activities may create detrimental barriers.
<a href="https://cardanofoundation.org/blog/mica-review-consultation-response" rel="noopener noreferrer nofollow">Benjamin Buergi</a>, the Foundation’s senior legal counsel, explained its take in this way:
“Regulation should follow the substance of an activity, the functions performed, and the risks created, not the technology through which it is conducted.”
Holders of ADA on Cardano can do their part to secure the network through the delegation of their stake. By doing this, they ensure that they still have control of their tokens that remain unlocked. The Foundation argues that this is in contrast to the intermediary that holds the customer assets or makes staking choices on behalf of the customers.
The Foundation asserts that just because a business provides blockchain infrastructure or provides access to a network does not mean that it is required to have a regulatory license.
<h3 class="wp-block-heading" id="strong-a-review-strong-not-strong-a-new-rulebook-strong">A review, not a new rulebook</h3>
It should be noted that the document provided by the Commission is not a legislative proposal. The officials are simply asking whether there is a need for further regulation of DeFi, staking and lending sectors.
Cardano believes that regulators should pay attention to the actual control of assets or transactions. It also supports maintaining the difference between MiCA and MiFID II in addition to providing exemptions for genuinely unique NFTs.
<h3 class="wp-block-heading" id="strong-what-strong-esma-strong-wants-instead-strong">What ESMA wants instead</h3>
ESMA sees things differently. In its <a href="https://www.esma.europa.eu/press-news/esma-news/esma-calls-changes-make-mica-clearer-safer-and-ready-emerging-services" rel="noopener noreferrer nofollow">September 30 response</a>, it called for clearer disclosures on staking, lending and borrowing. It also wants tighter rules for crypto promotions, including influencer marketing, and greater transparency on fees.
ESMA has also mentioned the need for licensing of companies that offer access to DeFi protocols. It is looking for better criteria to determine whether a service is genuinely decentralized.
Other European authorities share similar concerns. The European Banking Authority and ECB support EU-wide rules for crypto lending, borrowing and staking, according to <a href="https://www.freshfields.com/en/our-thinking/blogs/technology-quotient/mica-under-the-microscope-what-the-eba-and-the-ecb-told-brussels-about-the-revie-102o3sd" rel="noopener noreferrer nofollow">Freshfields</a>. Meanwhile, <a href="https://www.amla.europa.eu/document/download/d7647d66-98a5-49f9-b3f2-30fad47f198c_en?filename=AMLAs+Response+to+ECs+Targeted+Consultation+on+the+Review+of+MiCA.pdf" rel="noopener noreferrer nofollow">AMLA</a> wants a legal definition of DeFi arrangements and clearer ways to identify who controls them.
<h3 class="wp-block-heading" id="strong-the-strong-supervision-strong-gap-fatf-sees-strong">The supervision gap FATF sees</h3>
<a href="https://www.fatf-gafi.org/en/news/targeted-report-decentralised-finance-2026.html" rel="noopener noreferrer nofollow">FATF’s July 21 report</a> found that 132 of 143 reporting jurisdictions had not applied its standards to qualifying DeFi arrangements. Only two of 142 had licensed or registered one.
FATF says its standards apply where someone exercises control or sufficient influence.
Europe and North America account for roughly 60% of global DeFi transactions. FATF also linked two April 2026 attacks to North Korea. The attacks caused more than $570 million in losses, accounting for around 76% of reported virtual-asset hacking losses that year at the time.
<div class="wp-block-image">
 <figure class="aligncenter size-large"><img width="1024" height="576" src="https://www.cryptopolitan.com/wp-content/uploads/2026/10/EU-DeFi-Rules_-Five-Regulatory-Positions-1024x576.png" alt="">
 <figcaption> Cardano vs EU Regulators: Five Positions on MiCA, DeFi and Staking
 </figcaption>
 </figure>
</div>
<h3 class="wp-block-heading" id="strong-what-clarity-could-strong-mean-strong-for-europe-s-market-strong">What clarity could mean for Europe’s market</h3>
The cryptocurrency market in Europe is still on the rise. It has been stated by Kaiko that <a href="https://resources.kaiko.com/hubfs/Research/The%20State%20of%20the%20European%20Crypto%20Market%20-%202025%20-%202026%20Trends%20in%20Trading%20Activity.pdf" rel="noopener noreferrer nofollow">euro-denominated spot trading reached €362 billion in 2025</a> which is a 31% rise compared to the previous year. However, this growth cannot be attributed directly to MiCA. A <a href="https://www.sciencedirect.com/science/article/abs/pii/S0275531926003004" rel="noopener noreferrer nofollow">study</a> conducted in 2026 also concluded that there was no clear impact of MiCA milestones on the prices of cryptocurrencies.
Tighter regulations may provide better investor protection but at the same time are likely to increase compliance costs. Firms may decide to exit into less regulated markets. Nevertheless, clear regulations could help them operate in Europe with greater confidence.
The concerns extend beyond Cardano. In an <a href="https://www.cryptopolitan.com/circle-aave-europe-push-back-yield-ban-defi" rel="noopener noreferrer nofollow">earlier report by Cryptopolitan</a>, Circle, Aave and more than 50,000 EU citizens disapproved of the proposal of applying restrictions on stablecoin yields to borrowing, lending and staking activities. Still, the concern is mainly focused on the rewards given to participants rather than on the direct participation in a proof-of-stake network.
For Europe, the challenge is finding the right balance. Stronger oversight would protect investors and instill confidence in the market. However, overly broad rules would make it difficult for blockchain companies to operate and compete. What measures Brussels takes may determine where DeFi companies would choose to build and invest.
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Cardano Foundation urges EU to fix MiCA, not expand it to DeFi

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