France Seeks DeFi Liability Rules for Crypto Platforms

France has proposed changes to the European Union’s Markets in Crypto-Assets Regulation, or MiCA, that could make regulated crypto platforms liable for certain incidents involving decentralized finance protocols.

The proposals were submitted in a joint response to a European Commission consultation by France’s Treasury, Financial Markets Authority, central bank and Prudential Supervision and Resolution Authority. The Commission is reviewing whether MiCA should cover activities that were outside its original scope, including DeFi. The consultation also prompted crypto firms to seek stablecoin and DeFi reforms under MiCA.

“CASPs [crypto-asset service providers] should be liable for certain incidents affecting clients where they actively facilitated access,” the French authorities wrote.

MiCA currently excludes crypto services provided in a fully decentralized manner without intermediaries. France’s proposal would add duties for regulated platforms that connect customers to DeFi protocols.

Platforms would have to assess protocols before offering access and monitor them for security vulnerabilities and suspicious activity. French authorities also supported certification for protocols and smart contracts, with platforms facing liability for certain incidents linked to the services they provide.

The strictest requirements would apply to significant crypto-asset service providers, while smaller firms would face obligations based on their size. Platforms could still connect customers to uncertified protocols if they conduct their own checks and provide stronger warnings about the risks.

France opposed blanket certification requirements for developers of non-custodial and self-custodial wallets. It supported voluntary certification for more advanced wallets that include DeFi functions.

The response also proposed changes to MiCA’s supervisory system. France wants the European Securities and Markets Authority, or ESMA, to supervise significant crypto platforms instead of national regulators. It also called for the current threshold of 15 million average daily active users in the European Union to be lowered when determining whether a platform is significant.

French authorities proposed considering a platform’s custody assets, business risks and the structure of its wider corporate group when assigning supervisory responsibility to ESMA.

France also called for a review of MiCA’s rules for asset-referenced tokens. The category covers tokens designed to maintain a stable value by referring to one or more assets. French authorities noted that no asset-referenced tokens had been authorized under MiCA and proposed adapting the e-money token framework to cover stablecoins linked to multiple currencies.

The consultation responses will inform a report for EU lawmakers due by June 30, 2027. The report may include proposals to amend MiCA.