Anticipations are high as Europe is set to regulate Decentralized Finance (DeFi) in 2026. However, the ambiguity left by the Markets in Crypto-Assets Regulation (MiCA) has the sector on edge. The legislation, which is the first all-encompassing regulatory framework for the crypto industry, came into effect on December 30, 2024. It seeks to heighten investor protection, prevent fraud, and handle stablecoin reserve management.
As MiCA approaches its final implementation stages, policymakers are focusing on regulating DeFi, an area that still raises many questions, states Vyara Savova, the senior policy lead at the European Crypto Initiative (EUCI). During an appearance on Cointelegraph’s Chain Reaction X Spaces show on June 4, Savova mentioned that DeFi protocols are still in a regulatory grey area.
According to Savova, there is ambiguity regarding DeFi protocols as they are theoretically beyond MiCA’s scope. She went on to add, “No one actually knows what EU policymakers mean by DeFi.” She predicts that around mid-2026, EU authorities will embark on the task of legally defining decentralization.
Early MiCA framework received substantial criticism due to its weaknesses concerning decentralized protocols. It demanded DeFi platforms to comply with the same licensing and Know Your Customer (KYC) requirements as traditional financial services firms. A significant addition to the bill, Recital 22, stated that “fully decentralized” crypto-asset service providers “should not fall within the scope of this Regulation.”
Despite the MiCA framework being fully implemented at the end of 2024, lawmakers are constantly reviewing it every 12 to 18 months to fill in any potential regulatory gaps. However, contrary to several appeals from Christine Lagarde, the president of the European Central Bank, no progress will be made in the region regarding the MiCA II framework, according to Marina Markezic, executive director and co-founder of EUCI.
She added that current discussions revolving around stablecoins might result in specific legislative updates rather than a complete sequel to MiCA. In the meantime, the EU is yet to introduce new Anti-Money Laundering rules that will limit the use of privacy coins and anonymous crypto accounts. These provisions are expected to come into effect in 2027.
