Lawmakers should grant legal status to decentralized finance autonomous entities. By default, securities recognition should be given to crypto assets. The report examines the need for further rules addressing topics like DeFi, staking, and non-fungible tokens (NFTs) at a time when the European Union (EU) is finalizing its Markets in Crypto Assets (MiCA) policy.
The research recommends categorizing all crypto assets as transferable securities. They should be subject to stringent governance and authorization standards like conventional stocks and bonds. The default norm transfers the task of acquiring technical data and defining the scope of regulation to the industry. National regulators can specify otherwise if needed.
The Economic and Monetary Affairs Committee of the European Parliament requested the research. Academics from universities in Luxembourg, Sydney, and Hong Kong wrote it. It recognizes that the introduction of MiCA might not produce immediate benefits without reforms. Implementing regulations for the international crypto sector is challenging due to its global nature. With 100,000 crypto protocols, the task becomes even more complex.
Recommendations for Regulatory Framework
The report’s conclusions do not reflect the official position of the European Parliament. However, they emphasize the importance of clarity regarding the application of financial security laws to digital assets. Similar issues have emerged in the US as well. The Securities and Exchange Commission (SEC) has not yet decided whether to consider cryptocurrencies like Ether (ETH) as securities.
The EU institutions in charge of banking and securities markets must create specific rules to implement MiCA, which they signed into law on Wednesday. However, even before it was fully implemented, the European System Risk Board, which is in charge of keeping an eye on the dangers to financial stability, urged for new legislation to fill the holes created by MiCA. British specialists have been examining the legal status of decentralized autonomous organizations (DAOs). Observers often describe the field as a “Wild West” plagued by “fraudsters and thieves.”
Striking a balance between promoting innovation, protecting consumers, and preserving financial stability remains vital as the EU develops its regulatory framework for cryptocurrencies. The paper makes important contributions to existing discussions about comprehensive crypto rules in the European Union. It recommends treating crypto assets as securities by default and granting legal recognition to DeFi independent organizations.