The European Union has announced the creation of a new regulatory framework for decentralized finance (DeFi) by 2026. This initiative is driven by the need to clearly define the concept of decentralization and its impact on existing protocols.
DeFi Regulatory Framework and Decentralization
Vyara Savova, head of policy at the European Crypto Initiative, announced the EU's plan to launch a regulatory framework for DeFi in 2026. Current MiCA laws, set to take effect in 2024, do not provide clear definitions for decentralized protocols, creating uncertainty.
The proposed framework aims to clarify the definition of decentralization, impacting DeFi protocols like Ethereum, Aave, and Uniswap.
Impact of MiCA on DeFi and Future Rules for Privacy Coins
Notably, the exclusion of 'fully decentralized' protocols from MiCA reflects challenges reminiscent of those faced by traditional finance with MiFID, where initial uncertainty eventually led to greater institutional participation.
Additionally, new AML rules for privacy coins are set to be introduced by 2027, which will also significantly influence the market.
Predictions and Expectations from New Legislation
Experts believe that clearly defining decentralization will help stabilize regulatory standards and potentially attract more institutional players to the sector. Currently, Ethereum is showing growth, indicating increasing interest in DeFi protocols.
Thus, the establishment of a DeFi regulatory framework by 2026 along with further changes in rules for privacy coins will open new horizons for the entire crypto sector in the EU.
