As Europe begins laying the groundwork for crypto regulation beyond 2024, decentralized finance (DeFi) is emerging as a central topic for future oversight—despite remaining largely undefined under current frameworks.
The Markets in Crypto-Assets Regulation (MiCA), the EU’s pioneering attempt at comprehensive crypto legislation, officially took effect on December 30, 2024. Designed to enhance consumer protection, mitigate fraud risks, and manage stablecoin reserves, MiCA marks a major step forward in digital asset regulation.
However, MiCA’s approach to DeFi has sparked confusion. As the regulation enters its final implementation phase, European regulators are beginning to focus on how to treat decentralized systems—an area still shrouded in uncertainty, according to Vyara Savova, senior policy lead at the European Crypto Initiative (EUCI).
“DeFi is still in a grey zone,” Savova noted, explaining that current laws don’t clearly apply to decentralized protocols. “There’s no shared understanding yet of what ‘DeFi’ really means within EU law.”
According to Savova, from mid-2026 onward, EU officials are expected to begin defining what decentralization actually entails in legal terms. The ambiguity has sparked concern among DeFi developers and advocates.
While MiCA aimed to bring order to the crypto landscape, it faced criticism for imposing traditional financial compliance requirements—like licensing and Know Your Customer (KYC) rules—on DeFi platforms. This has led to concerns about how decentralized systems can realistically comply.
That said, Recital 22 of MiCA acknowledges that truly decentralized services could potentially fall outside the scope of the regulation—offering some flexibility, at least in theory.
No MiCA II on the Horizon
Despite ongoing gaps, a second iteration of the regulation (often referred to as “MiCA II”) is not in the cards, according to Marina Markezic, EUCI co-founder and executive director.
“You might have heard talk of a MiCA II, but it’s not happening,” Markezic stated. Instead, she indicated that targeted updates—particularly around stablecoins—may be introduced through amendments or new provisions, rather than a full-scale overhaul.
Meanwhile, the EU is preparing to implement new anti-money laundering (AML) rules aimed at curbing the use of privacy coins and anonymous wallets. These measures are scheduled to come into force in 2027.
As policymakers continue to debate the future of crypto in Europe, DeFi remains both a priority and a puzzle—awaiting clearer answers in the years ahead.
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