EU Eyes DeFi Rules Without Defining What It Is

As the European Union prepares for its next phase of crypto oversight, regulators are turning their attention to decentralized finance (DeFi)—without a clear definition of what decentralization actually means.

MiCA, the EU’s landmark crypto regulation, came into full effect in December 2024, aiming to bring structure to digital assets through investor protection, stablecoin guidelines, and fraud prevention. But as implementation rolls out, legal experts say the framework leaves DeFi in a grey zone.

Vyara Savova, senior policy lead at the European Crypto Initiative (EUCI), noted during a discussion that DeFi remains largely undefined by EU policymakers. Although MiCA doesn’t explicitly cover decentralized protocols, its language and licensing requirements have created confusion for projects that don’t operate like traditional financial entities.

Under MiCA, even fully autonomous DeFi platforms may be expected to follow the same Know Your Customer (KYC) rules as centralized institutions—a mismatch that has sparked criticism. While Recital 22 in the regulation hints that fully decentralized services could fall outside its scope, the lack of precise legal language has left the door wide open to interpretation.

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Despite earlier speculation, the EU has no plans to draft a full “MiCA II” update. According to EUCI co-founder Marina Markezic, future changes will likely come in the form of targeted amendments rather than an entirely new law. Discussions are already underway around stablecoins and privacy tools, which could be addressed in upcoming revisions.

Meanwhile, additional anti-money laundering measures—aimed at limiting anonymous crypto usage—are expected in 2027, adding further complexity for DeFi developers navigating the European market.

Until decentralization is clearly defined in legal terms, EU policy will likely continue to operate in uncertainty, even as regulators gear up to confront DeFi’s growing influence.

Alexander Stefanov

With over 8 years of experience in the cryptocurrency and blockchain industry, Alexander is a seasoned content creator and market analyst dedicated to making digital assets more accessible and understandable. He specializes in breaking down complex crypto trends, analyzing market movements, and producing insightful content aimed at educating both newcomers and seasoned investors. Alexander has built a reputation for delivering timely and accurate analysis, while keeping a close eye on regulatory developments, emerging technologies, and macroeconomic trends that shape the future of digital finance. His work is rooted in a passion for innovation and a firm belief that widespread education is key to accelerating global crypto adoption.