Cardano Foundation urges EU to avoid separate DeFi and staking rules

The Cardano Foundation urged the European Union not to create standalone rules for decentralized finance and staking. The foundation argued that existing financial laws should govern these activities according to their functions and risks, rather than their underlying technology. A Wednesday blog post presented the foundation's 19-page submission, dated September 30, to the European Commission.

The foundation called for regulators to distinguish direct participation in decentralized networks from financial services offered through intermediaries, especially services involving custody or control of users' assets. The foundation said Cardano users can delegate ADA tokens to support network security without giving up custody or locking the tokens. The foundation argued that this participation should receive different treatment from staking services offered through intermediaries.

The submission sought clearer boundaries between the EU's Markets in Crypto Assets Regulation (MiCA) and existing financial laws. The foundation warned that overlapping requirements and inconsistent interpretations among member states could leave crypto businesses across the EU facing uncertainty.

EU regulators are considering broader oversight of crypto services. In September, the European Securities and Markets Authority recommended extra safeguards for staking, lending and borrowing. The authority also recommended creating a regulated service category for companies offering access to decentralized finance protocols. The Cardano Foundation joined five other blockchain organizations in an October 20 letter seeking greater regulatory clarity in the United States. The letter urged the US Securities and Exchange Commission to formally classify digital commodities as non-securities under the agency's proposed crypto framework.