The Cardano Foundation urged the European Union against introducing new, standalone regulations for decentralized finance and staking, arguing instead that existing financial laws should govern such activities based on their functions and risks rather than underlying technologies.
In a 19-page submission to the European Commission dated Sept. 30, the foundation outlined its position: regulation must follow the substance of an activity, the functions performed, and the risks created. It warned that overlapping requirements and inconsistent interpretations across member states could create uncertainty for crypto businesses operating within the EU.
The submission called for a clear distinction between direct participation in decentralized networks and financial services provided by intermediaries. This differentiation is critical for services involving custody or control of users' assets. Noncustodial activities should be treated differently.
Cardano users delegate their native ADA tokens to secure the network through direct participation that does not require surrendering custody or locking tokens. The foundation argued this type of network participation should not be grouped with staking services operated by intermediaries that do control user assets.
The foundation's stance comes as EU regulators consider expanding oversight of crypto services. The European Securities and Markets Authority (ESMA) made specific recommendations in September, suggesting additional safeguards for staking, lending, and borrowing activities. ESMA also recommended creating a new regulated service category for firms providing access to DeFi protocols.
The Cardano Foundation pushed for clearer distinctions between the EU's Markets in Crypto Assets Regulation (MiCA) and existing financial laws, warning against complexities arising from potentially conflicting regulatory frameworks.
Beyond the EU, the Cardano Foundation joined five other blockchain organizations in an Oct. 20 letter to the U.S. Securities and Exchange Commission urging the agency to formally recognize digital commodities as non-securities under its proposed crypto framework.
