EU Consultation Targets DeFi, Prediction Markets, Perps

The European Commission opened a consultation on extending its Markets in Crypto-Assets regulation to cover decentralized finance, prediction markets, and perpetual futures, among other services currently outside the rules.

MiCA exempts services that operate without a central intermediary. The commission said it is no longer confident that exemption holds as DeFi has grown. A central problem, the consultation document notes, is that there is no agreed definition of decentralization.

The consultation covers DeFi protocols, non-fungible tokens, staking, lending, borrowing, prediction markets, tokenized deposits, and crypto perpetual futures. For some of these, regulators are deciding whether they should fall under MiCA or the stricter MiFID framework for traditional securities.

Regulators are also exploring certification schemes for DeFi protocols and smart contracts. They are considering whether platforms should only connect users to vetted applications, rather than allow access to any unapproved protocol. The commission is asking how to determine which protocols are truly decentralized and which still rely on a central party.

On tokenized deposits, the consultation assesses use cases from cross-border payments to atomic securities settlement. It asks whether the existing banking framework, including the Capital Requirements Regulation, already covers these products or whether a new rule set is needed.

The commission said the feedback will inform any legislative proposals. A shift to regulate perpetual futures under MiFID would bring margin requirements, position limits, and reporting obligations – a material change for exchanges that currently offer such products outside the European Union.

The consultation is open until 31 August.