The Cardano Foundation has formally urged the European Union to refrain from introducing standalone regulations for decentralized finance (DeFi) and staking activities. In a blog post detailing its September 30 submission to the European Commission, the foundation argued that existing financial laws should govern these sectors based on their functional risks rather than the underlying technology. The core of the foundation’s position is that regulation must follow the substance of an activity, distinguishing between direct participation in decentralized networks and services provided by intermediaries who hold custody or control over user assets.
Specifically, the foundation highlighted that Cardano users can delegate native ADA tokens to secure the network without surrendering custody or locking their funds. It contended that such direct participation should be treated differently from intermediary-operated staking services. The submission also called for clearer distinctions between the EU’s Markets in Crypto Assets Regulation (MiCA) and existing financial frameworks, warning that overlapping requirements and inconsistent interpretations across member states could create significant uncertainty for crypto businesses operating within the bloc.
This advocacy occurs as EU regulators actively consider expanding oversight of crypto services. In September, the European Securities and Markets Authority (ESMA) recommended additional safeguards for staking, lending, and borrowing, along with the creation of a new regulated service category for firms providing access to DeFi protocols. Beyond Europe, the Cardano Foundation joined five other blockchain organizations in an October 20 letter urging the US Securities and Exchange Commission (SEC) to formally recognize digital commodities as non-securities under its proposed crypto framework.
The Cardano Foundation’s push against expanding MiCA to cover direct staking and DeFi participation underscores a critical tension in current regulatory frameworks: the difficulty of applying traditional intermediary-centric rules to decentralized protocols. By arguing that custody and control are the primary risk vectors, the foundation seeks to protect the operational model of proof-of-stake networks where users retain asset ownership. If regulators adopt this functional approach, it could prevent the fragmentation of the EU crypto market, allowing compliant projects to operate without facing disproportionate compliance burdens designed for centralized exchanges.
However, the divergence between ESMA’s recommendations for stricter safeguards and the foundation’s call for clarity suggests potential regulatory friction ahead. The emphasis on avoiding overlapping requirements highlights the risk that inconsistent national implementations of MiCA could hinder cross-border operations for crypto firms. As the EU moves toward finalizing its stance on DeFi, the outcome will likely determine whether decentralized participation remains distinct from financial services provision, impacting how future legislation addresses both technical infrastructure and consumer protection.
