Malta regulator opens DeFi and DAO consultation under MiCA

Malta's financial regulator has launched a public consultation to explore how decentralized finance and decentralized autonomous organizations could be regulated under the European Union's Markets in Crypto-Assets framework. The Malta Financial Services Authority published a discussion paper on June 12, inviting industry feedback through July 10.

The paper proposes creating a new legal category of "software-based organizations" to encompass DAOs and other entities governed primarily through code. Rather than establishing a standalone legal concept for DAOs, the regulator suggests this approach would separate the legal framework governing the organization itself from the rules applicable to the underlying protocol and software. This distinction is intended to address persistent questions about governance and accountability in the DeFi sector.

A central theme of the consultation is the challenge of defining "full decentralization." The EU's MiCA regulation excludes services provided in a fully decentralized manner without any intermediary from its scope. However, the MFSA notes that many projects claiming to be decentralized retain centralized features, such as concentrated...