Cardano Foundation urges EU to fix MiCA, not expand it to DeFi

The Cardano Foundation has urged the European Union to resolve existing issues within MiCA prior to expanding regulations to cover decentralized finance (DeFi) and staking. In an October 21 statement, the organization emphasized that operating on a public blockchain does not inherently equate to acting as a financial services provider.

Delegation without surrendering custody

Responding to the European Commission’s consultation on September 30, the Foundation pushed back against the creation of separate rules for staking and DeFi. Instead, it recommended that the EU apply current legislative frameworks solely to entities that actively provide financial services or manage user assets. Furthermore, the organization warned that regulating blockchain infrastructure simply because it facilitates financial activity could introduce harmful roadblocks.

Benjamin Buergi, senior legal counsel for the Foundation, clarified their position:

“Regulation should follow the substance of an activity, the functions performed, and the risks created, not the technology through which it is conducted.”

Cardano ADA holders help secure the network by delegating their stake, allowing them to retain full control over their unlocked tokens. The Foundation contrasts this mechanism with intermediaries that hold customer funds or make staking decisions on a user’s behalf.

Ultimately, the Foundation maintains that businesses offering blockchain infrastructure or network access should not automatically be mandated to hold a regulatory license.

A review, not a new rulebook

The Commission’s document is not a formal legislative proposal. Rather, European officials are currently gathering feedback to determine whether the lending, staking, and DeFi sectors require additional oversight.

Cardano argues that regulators should focus on who actually controls assets and transactions. The group also advocates for keeping a clear distinction between MiCA and MiFID II, alongside granting exemptions for genuinely unique NFTs.

What ESMA wants instead

In contrast, ESMA adopted a different stance in its September 30 response, advocating for enhanced disclosures regarding borrowing, lending, and staking. The agency also seeks stricter guidelines for crypto promotions—including influencer marketing—and improved fee transparency.

Additionally, ESMA raised the possibility of licensing companies that provide access to DeFi protocols, while searching for better metrics to evaluate true decentralization.

Other European regulatory bodies share similar apprehensions. According to Freshfields, both the European Banking Authority and the ECB back EU-wide standards for crypto lending, borrowing, and staking. Meanwhile, AMLA is pushing for a formal legal definition of DeFi arrangements alongside clearer methods to pinpoint who controls them.

The supervision gap FATF sees

A July 21 report by the FATF revealed that 132 out of 143 reporting jurisdictions had failed to apply its standards to qualifying DeFi operations, with only two out of 142 having registered or licensed a single entity.

The FATF asserts that its standards apply whenever an entity exercises sufficient influence or control.

Europe and North America represent approximately 60% of worldwide DeFi transactions. The FATF also tied two April 2026 attacks to North Korea, noting that these incidents led to over $570 million in losses, representing about 76% of all reported virtual-asset hacking losses for that year at the time.

What clarity could mean for Europe’s market

The European cryptocurrency market continues to expand. Data from Kaiko shows that euro-denominated spot trading hit €362 billion in 2025, marking a 31% increase year-over-year. However, this growth cannot be directly tied to MiCA, and a 2026 study concluded that MiCA milestones had no measurable impact on cryptocurrency valuations.

While stricter regulations may boost investor protection, they also threaten to drive up compliance costs and push firms toward less regulated jurisdictions. Even so, clear rules could provide companies with greater confidence to operate inside Europe.

These worries go beyond Cardano. As previously reported by Cryptopolitan, Circle, Aave, and more than 50,000 EU citizens pushed back against proposals to restrict stablecoin yields across borrowing, lending, and staking. Even so, opposition is primarily centered on participant rewards rather than basic participation in proof-of-stake networks.

Europe faces the delicate task of balancing robust investor protection and market confidence with avoiding overly restrictive rules that stifle blockchain innovation and competition. Ultimately, the decisions made in Brussels will dictate where DeFi enterprises choose to build and invest.

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