The Cardano Foundation has called on European Union regulators to apply existing financial legislation to decentralized finance (DeFi) and staking activities, cautioning against the creation of new, separate regulations specifically targeting blockchain-based technologies.
Foundation appeals for function-based regulation
In a recent blog post summarizing its 19-page submission to the European Commission, the foundation emphasized that legal frameworks should address financial activities based on their economic substance and risk profiles, rather than focusing on the underlying technology. The foundation represents the Cardano blockchain community and supports the development and adoption of the Cardano network.
The Cardano Foundation drew a clear distinction between users’ direct participation in decentralized networks and financial services offered by intermediaries, especially those that involve the custody or control of client assets.
Regulation should follow the substance of an activity, the functions performed, and the risks created, not the technology through which it is conducted.
Cardano users can delegate their ADA tokens to help secure the network without relinquishing custody or locking their tokens, the foundation explained. It argued that this form of staking differs fundamentally from intermediary-run staking services, where third parties control user assets, and should be regulated accordingly.
The call for clarity followed the foundation’s submission to European authorities dated September 30. The document requested that authorities distinguish between direct, noncustodial participation in decentralized networks and intermediary-run financial services.
EU regulators weigh new crypto oversight
Regulatory discussions are underway in Europe as the European Securities and Markets Authority (ESMA) considers expanding oversight in the digital assets sector. In September, ESMA recommended stronger safeguards for activities such as staking, lending, and borrowing, and suggested establishing a new regulated service category for companies facilitating access to DeFi protocols.
The Cardano Foundation’s submission also urged European regulators to clearly separate requirements under the existing Markets in Crypto Assets Regulation (MiCA) from broader financial laws, warning that ambiguous regulations and conflicting approaches across EU member nations could generate uncertainty for cryptocurrency companies.
MiCA is set to become the main framework for crypto market oversight in Europe, aiming to harmonize policy across EU states, yet industry organizations have raised concerns about potential overlaps and compliance burdens.
Broader push for global clarity
Beyond Europe, the Cardano Foundation has advocated for more regulatory certainty in other major markets. On October 20, it joined five other blockchain industry groups in an open letter to the US Securities and Exchange Commission. The organizations urged the SEC to formally categorize digital commodities as non-securities as part of the agency’s proposed rules for crypto assets.
The call for clarity follows growing debate among US regulators, including differing views between the SEC and the Commodity Futures Trading Commission (CFTC), on how to classify and regulate digital assets.
Mini dictionary: Cardano Foundation, an independent non-profit organization dedicated to promoting and standardizing the Cardano blockchain network.
Uncertainty regarding overlapping requirements and inconsistent interpretations of MiCA across member states could create challenges for crypto businesses operating within the EU.
