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The Association of Financial Markets in Europe (ASME), an industry advocacy group representing wholesale market participants in Europe, has called for the decentralized finance (DeFi) sector to be included in the recently adopted Crypto Asset Markets (MiCA) regulations.
MiCA is considered to be the first potential comprehensive cryptocurrency legislation due to come into force in December 2024. However, the cryptocurrency legislature excludes certain aspects of the cryptocurrency ecosystem, including DeFi and non-fungible tokens (NFTs). The ASME, in a paper addressed to the European Council, noted that the DeFi exclusion could create unintended financial stability risks and potential spillover effects.
“While the current overlap between DeFi and traditional finance (TradFi) is not yet significant, as noted by the Financial Stability Board (FSB), this should be actively monitored and managed,” the document says.
The paper recommends that the EU develop a taxonomy of DeFi activities and digital assets with a risk-based approach. Regarding the governance of a decentralized ecosystem such as DeFi, the trading body has proposed a coherent regulatory framework along with various levels of centralization.
Cointelegraph reached out to AFME for comment on the matter, but did not immediately receive a response.
The trade body added that their request should not be seen as a final decision, but rather as a discussion of creating “a body of work to further explore some of the technical issues that are emerging in this new area of digital finance, as well as to raise some initial suggestions on how DeFi can be addressed.” in terms of regulation.
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The trade body aims to start an initial discussion of this topic in the industry and find innovative policy solutions for DeFi in both the public and private sectors.
MiCA is currently in the consultation phase, under which the European Union will begin a three-part consultation process starting in July. The measures and proposals collected during the consultation phase are subject to approval by the European Commission, the European Parliament and the European Council.