European Commission seeks industry recommendations to better regulate the DeFi sector

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As the European Commission’s inquiry into the Decentralized Finance (DeFi) regulation picks up steam, European Commissioner Peter Kerstens urged the cryptocurrency sector to contribute to finding solutions for the matter.

The co-head of the fintech task group and senior adviser to the Commission’s finance division stated, “If you want us to come up with great solutions come and talk to us.” 

While speaking at a panel in Brussels that was hosted by a European crypto-supporting group, Kerstens encouraged the public to share their proposals and solutions by stating:

“If you have bad solutions, we already have plenty of those ourselves.”

European Commission’s MiCA framework

The Markets in Crypto-Assets or MiCA framework, which was approved by the European Council earlier in October, is anticipated to be implemented by the start of next year, marking the completion of the EU’s most recent effort for regulating crypto assets. The legislation focuses on regulating centralized organizations like exchanges and other service providers as well as cryptocurrencies. The legislative language requires the European Commission to develop regulations for DeFi 18 months following the implementation of MiCA.

“We need to think more imaginative about how DeFi can be captured in legal concepts, if it is necessary,“ Kerstens said. The regulator added that for DeFi to develop into its potential “the best thing to do from a policy view is to do nothing at all — maybe.” 

Kerstens claimed that DeFi still has risks even in the absence of third parties committing fraud or going bankrupt. For instance, a hack caused Solana-based Mango Markets to lose around $100 million.

The European Commission has increased funding for research into how to regulate DeFi. Earlier this month, it published a proposal to explore “embedded supervision” of the Ethereum platform. The Commission then unveiled a fresh academic report with a number of unique policy proposals.

Notably, the European Parliament introduced modifications to the EU’s Anti-Money Laundering Regulation in an effort to link DeFi, DAOs, and NFTs, signaling a tougher actions against illicit activities in the industry.

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