The European trade body wrote to the EU to warn that the exclusion of DeFi from the purview of MiCA regulations could create unintended risks to financial stability.
The Association for Financial Markets in Europe , an industry advocacy group that represents wholesale market participants in Europe, called for the inclusion of the decentralized finance sector within the recentlyMiCA is considered the first potential comprehensive crypto legislation that is set to come into effect in December 2024. However, the crypto legislature excludes certain aspects of the crypto ecosystem including DeFi and nonfungible tokens .
“While as noted by the Financial Stability Board the current overlap of DeFi and Traditional Finance is not yet significant, this should be actively monitored and managed,” the paper added. The paper recommended that the EU should come up with a taxonomy for DeFi activities and digital assets with a risk-based approach. In terms of governing a decentralized ecosystem like DeFi, the trade body suggested a consistent regulatory framework along with different levels of centralization.
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