Can EU improve MiCA without new rules? Cardano Foundation makes its case

The Cardano Foundation is against bringing decentralized finance, staking and other blockchain activities under new European Union crypto regulations and argues that policymakers should rather focus on improving the existing Markets in Crypto-Assets Regulation.

In its September 30 response to a European Commission consultation, the Foundation called for clearer rules governing digital assets and greater consistency in how existing legislation is applied across member states. It warned that creating separate regulatory frameworks for activities conducted through decentralized networks could introduce unnecessary compliance requirements without addressing risks already covered by existing laws.

European policymakers are currently reviewing MiCA’s implementation and considering whether activities currently outside its scope need additional oversight.

As previously reported by crypto.news, the European Commission opened its review in May to gather feedback from cryptocurrency businesses, financial institutions, regulators and other market participants.

Cardano Foundation wants DeFi and staking treated differently

A central concern raised by the Foundation involves the distinction between decentralized blockchain infrastructure and financial services operated by identifiable companies or intermediaries.

The Foundation argued that regulatory requirements should be based on what a company or individual actually does, how much control they have over customer assets and the risks involved in those activities.

In the case of decentralized finance, the Foundation argued that simply providing blockchain infrastructure or software should not automatically qualify as offering a regulated financial service.

Public blockchains allow users to interact with applications, execute transactions and participate in network operations without necessarily relying on an intermediary. According to the Foundation, regulators should consider whether an identifiable person or entity actually controls the relevant assets or transactions before applying financial services requirements.

Staking was identified as one area where such distinctions would be particularly important.

On Cardano, ADA holders can delegate their stake to participate in the network’s consensus process without transferring custody of their tokens or locking them. The Foundation said participation of this kind supports the security and decentralization of proof-of-stake networks.

By comparison, staking services operated by intermediaries may involve custody arrangements or discretionary management of customer assets, creating different regulatory considerations.

The Foundation therefore recommended keeping direct participation in blockchain consensus mechanisms separate from commercial staking services when determining which regulatory obligations apply.

European lawmakers have taken a different position on whether additional oversight may be necessary. In July, the European Parliament called for a review of DeFi, staking, crypto lending and NFTs under MiCA, although its policy position did not introduce any immediate legal changes.

“Europe has the opportunity to become a global leader in tokenised capital markets, but this requires legal certainty and a technology-neutral regulatory framework. Financial instruments should continue to be regulated according to their economic characteristics, regardless of the technology used for their issuance, custody or transfer,” Coco Chen, Associate Director of Technology & Operations at the Association for Financial Markets in Europe told crypto.news in comments.

MiCA review raises questions over existing financial laws

Another part of the consultation concerns how MiCA interacts with the EU’s existing financial services legislation, particularly the Markets in Financial Instruments Directive II, commonly known as MiFID II.

Certain crypto assets fall under MiCA, while tokens classified as financial instruments are governed by existing securities and financial market rules.

However, determining the correct classification can become complicated when tokens combine several functions or their characteristics change over time.

The Foundation supported maintaining the current distinction between the two regulatory frameworks but requested clearer guidance for hybrid tokens and assets whose legal classification may be interpreted differently across EU member states.

Its response argued that classification should depend on an asset’s actual characteristics and legal rights, regardless of whether those rights are represented through blockchain technology.

Similar concerns were raised over stablecoins, particularly arrangements involving multiple issuers or operations across different jurisdictions.

The Foundation recommended clarifying how such structures should be treated under MiCA and addressing potential overlaps with European payment services legislation.

Meanwhile, the European Central Bank and other national central banks have proposed expanding restrictions on stablecoin remuneration to cover indirect returns generated through lending, borrowing and staking arrangements.

Environmental disclosure requirements were another area identified for improvement, with the Foundation calling for reporting rules that account for differences between blockchain architectures.

Cardano Foundation calls for existing NFT exemptions to remain

NFTs were another focus of the consultation, particularly whether tokens belonging to large collections should continue to qualify for exemptions under MiCA.

The Foundation supported retaining the exclusion for genuinely unique and non-fungible assets, arguing that membership in a collection should not automatically determine whether a token is legally considered fungible.

Instead, classification should depend on the individual asset’s characteristics and whether it is genuinely interchangeable with other tokens.

Its response further argued that subsequent activities involving an NFT, including fractional ownership arrangements or integration into financial applications by independent third parties, should not automatically change the classification of the original asset.

The Foundation opposed creating a separate regulatory regime for NFT-related services, recommending that relevant activities be assessed under existing legislation.

A similar approach was proposed for prediction markets, perpetual futures and cryptocurrency lending, with the Foundation arguing that their economic and legal characteristics should determine which financial regulations apply.

EU regulatory differences remain a concern

Despite MiCA establishing common rules across the European Union, the Foundation said differences in national interpretation and supervisory practices continue to create uncertainty for cryptocurrency businesses.

Among its recommendations were more consistent regulatory interpretations and clearer rules governing ownership, transfers and third-party rights involving tokenized assets across national borders.

The Foundation suggested harmonized conflict-of-laws provisions to determine which country’s laws apply to particular transactions, without requiring member states to adopt identical property laws.

Its submission addressed access for companies operating outside the EU, supporting legitimate reverse solicitation arrangements and consideration of comparable foreign regulatory frameworks.

Similar concerns over inconsistent supervision have appeared in the European Securities and Markets Authority’s 2027 supervisory priorities, which include coordinating national regulators, monitoring reverse solicitation and developing common reporting standards for crypto asset service providers.

The Foundation warned that complex compliance obligations could place smaller cryptocurrency businesses at a disadvantage compared with established companies that have more resources to meet regulatory requirements.

It said the ongoing review should address implementation problems while preserving regulatory safeguards, with the European Commission expected to consider the consultation responses before deciding whether legislative changes are necessary.