XReg Consulting, a crypto industry regulatory consulting company, believes that decentralized finance (DeFi) may be difficult to meet regulatory requirements.
According to a report released by XReg this week, the cryptocurrency regulations proposed by the European Commission will pose specific risks to the DeFi industry.
According to a previous report by “Beijing”, on September 24, the European Commission passed the proposed crypto asset market (MiCA) regulation, which aims to strengthen consumers and investors in the crypto industry by imposing a series of obligations on crypto asset issuers protection.
The regulations stipulate that the issuer of encrypted assets must operate as a legal entity in the EU to operate encryption services. This special requirement is a major challenge for DeFi projects because the issuer of DeFi tokens is “sometimes unidentifiable.”
The report pointed out that “because the issuer of encrypted assets must be a legal entity, this may pose a major challenge for decentralized issuance of encrypted projects without an identifiable issuer.”
XReg pointed out that MiCA can generally promote consumer and investor protection, market integrity and financial stability. However, the DeFi industry may eventually encounter “significant, irreconcilable regulatory challenges and possible problems, at least in Europe.”
The report pointed out that it remains to be seen how MiCA will coexist with innovative DeFi projects, which “may have difficulty meeting regulatory requirements.”
The International Trusted Blockchain Application Association (INATBA), an alliance of crypto companies, also raised concerns about this. INATBA believes that under the proposed regulations, some early markets like DeFi “may no longer allow European citizens to enter.”
Although the European Commission has approved MiCA, the proposed regulatory requirements must undergo a regulatory review within the EU before they can be implemented. This process may take more than a year.
