The Cardano Foundation submitted a 19-page document to the European Commission on Sept. 30 opposing new standalone regulations for decentralized finance and staking activities. The foundation published a blog post Wednesday detailing its position, emphasizing that existing financial laws should apply based on the function and risks of an activity, rather than the underlying technology.
The submission argues that overlapping requirements between the EU's Markets in Crypto Assets Regulation (MiCA) and current financial statutes could introduce significant uncertainty for crypto businesses operating within the bloc. This includes potential for inconsistent interpretations across member states, creating a fragmented regulatory environment.
"Regulation should follow the substance of an activity, the functions performed, and the risks created, not the technology through which it is conducted," the foundation stated in its submission. The foundation called for distinguishing between direct network participation and financial services offered by intermediaries.
The foundation specifically highlighted non-custodial staking on Cardano as an example. Users can delegate their native ADA tokens to secure the network without surrendering custody or locking their assets. This direct participation, the foundation argues, requires different regulatory treatment compared to staking services provided by intermediaries that involve custody or control of user funds.
The filing comes as EU regulators actively consider expanding their oversight of crypto services. The European Securities and Markets Authority (ESMA) issued recommendations in September for additional safeguards covering staking, lending and borrowing activities. ESMA also recommended creating a new regulated service category targeting firms that provide access to decentralized finance protocols.
On Oct. 20, the Cardano Foundation joined five other blockchain organizations in a 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.
