Malta proposes DeFi rulebook to bring DAOs under MiCA

On June 12 the Malta Financial Services Authority opened a public consultation proposing a legal framework for decentralized finance. The paper would recognise decentralized autonomous organizations as a new category of “software-based organizations” under the EU’s Markets in Crypto-Assets rules. The regulator is inviting industry responses by July 10.

The discussion paper sets out a model that treats DAOs and similar software-governed entities as a type of organisation rather than creating a separate legal concept for each DAO. The MFSA proposes separating the legal rules that apply to the organisation from the rules that govern the underlying protocol and software so obligations and liabilities can be assigned to identifiable actors where needed.

The regulator notes the current boundary of MiCA. “MiCA excludes fully decentralised models from its regulatory scope, meaning that projects without intermediaries or central control may not need to comply with MiCA,” the paper states.

The MFSA adds that many DeFi projects retain centralised features, such as concentrated governance or identifiable administrators, that complicate claims of full decentralisation and create questions about who is accountable to regulators and users.

Malta introduced one of the region’s first comprehensive digital asset frameworks in 2018. The new discussion paper aims to clarify how DeFi operators might fit within MiCA and to collect practical input from industry participants on where legal responsibilities should lie.

European institutions have also focused on DeFi. A European Central Bank working paper published in March found governance and control across several major DeFi protocols remained highly concentrated, indicating many projects may not meet a test of full decentralisation. In May the European Commission launched a targeted review of MiCA and requested views on topics including stablecoin interest payments, the treatment of DeFi and whether additional rules are needed.

Not all advisers favour expanding MiCA specifically for DeFi. Peter Kerstens recommended prioritising the integration of tokenisation into a broader digital-asset framework rather than creating a second version of MiCA focussed only on decentralised finance.

The consultation invites views on the scope of the proposed legal category, how obligations should be allocated between software protocols and identifiable participants, and whether existing corporate or trust law could be adapted for software-governed organisations. Responses will be accepted until July 10.