EU is pushing to regulate Defi especially lending protocols under MiCA

[shinratensei_]

The European Banking Authority (EBA) has called for crypto lending to be brought under the European Union’s Markets in Crypto-Assets (MiCA) framework as regulators consider potential changes to MiCA.

In a response to the European Commission’s (EC) targeted consultation on MiCA, the EBA said crypto borrowing and lending should be regulated, including where crypto asset service providers facilitate access to decentralized finance (DeFi) lending protocols.

The regulator recommended that the EC conduct a cost-benefit analysis of legislative changes that could add intermediating crypto borrowing and lending to the list of services regulated under MiCA, potentially adding specific compliance requirements and oversight activity. It also suggested requirements for crypto firms that provide clients access to DeFi lending protocols.

source : https://cointelegraph.com/news/eu-eba-crypto-lending-defi-mica-rules

Another day, another EU effort to regulate everything in sight, it seemed that they also want to regulate defi protocols. The thing is defi protocols are supposedly decentralized. With that in mind, how are they going to prevent their citizens from using the defi protocol that's NOT licensed?, are they going to enforce massive defi site blocking just like how China blocked some part of the internet using great wall? or are they going to consider any address interacted with the protocol as tainted? what do you think?

[cryptoaddictchie]

If thats the case then EU users are screwed. Theres a lot of defi protocol out there and if they really not comply with these and they may loss some clients and users. Actually their strict on defi will affect both sides. Im aware theres a lot of peeps that are using lending protocol and defi and will be subject to block if those platform didnt comply. Will VPN suffice the entry? Or a violation for any users? Really not a good friendly regulations.

[hugeblack]

It could be an ideal opportunity to prove that DeFi are truly decentralized.
However, I believe that many of these protocols will comply with any regulatory measures, and we might even see "KYC DeFi" Since DeFi was not built on a truly decentralized architecture; rather, it is simply another way to pool liquidity without any effort.

[ultrloa]

It could be an ideal opportunity to prove that DeFi are truly decentralized.
However, I believe that many of these protocols will comply with any regulatory measures, and we might even see "KYC DeFi" Since DeFi was not built on a truly decentralized architecture; rather, it is simply another way to pool liquidity without any effort.

This is indeed the time to prove how good their project and also it could help people to know which project is fully decentralized. There are some projects aren't fully decentralized, because what actually happen is it still rely on their token holders and also with their developers.

But the problem if KYC is implemented, since it defeats the essence of DeFi.

With that situation, the challenge for those platforms if they can operate without getting heavy interference by regulators. Since if it happens they required to asked KYC then that platform might became same or closer on fintech.

[denshin]

they cant really touch the contracts, only the websites in front of them. so my guess is KYC on the big frontends and the same contracts underneath for anyone who knows another way in

[Jostle]

Agree they can't touch the contracts.

They could however, ban the IP on the frontend, which could easily be circumvented via a VPN. If you can regulate DeFi, then DeFi is not decentralized.

[shinratensei_]

Will VPN suffice the entry? Or a violation for any users? Really not a good friendly regulations.

Probably, I bet they're going to enforce geofencing but a VPN is enough to make the Defi accessible again.

It could be an ideal opportunity to prove that DeFi are truly decentralized.
However, I believe that many of these protocols will comply with any regulatory measures, and we might even see "KYC DeFi" Since DeFi was not built on a truly decentralized architecture; rather, it is simply another way to pool liquidity without any effort.

Exactly, the worst case scenario might be geofencing and yet anybody could interact with the contract directly. Regulating Defi is waste of money and time since it's decentralized. I hope they know that. Maybe that Defi protocols are going to imitate how Hyperliquid enforcing restriction to their users because these Defi protocols are always "Nuh-uh, the frontend is not decentralized" and comply as facade which isn't wrong if they're running business.

[cryptoaddictchie]

Probably, I bet they're going to enforce geofencing but a VPN is enough to make the Defi accessible again.

Maybe same goes with the CEX banned here in our country. Most of the cex like Binance, Bybit, Kucoin, Mexc and others has been removed from Apple Store and Playstore and some restricted access but with some local provider still can be able to access the apps and the site.  However this is hassle for any users with thr accouny trying to access from a typical connection since Philippines banned it.

[Abiky]

The European Banking Authority (EBA) has called for crypto lending to be brought under the European Union’s Markets in Crypto-Assets (MiCA) framework as regulators consider potential changes to MiCA.

In a response to the European Commission’s (EC) targeted consultation on MiCA, the EBA said crypto borrowing and lending should be regulated, including where crypto asset service providers facilitate access to decentralized finance (DeFi) lending protocols.

The regulator recommended that the EC conduct a cost-benefit analysis of legislative changes that could add intermediating crypto borrowing and lending to the list of services regulated under MiCA, potentially adding specific compliance requirements and oversight activity. It also suggested requirements for crypto firms that provide clients access to DeFi lending protocols.

source : https://cointelegraph.com/news/eu-eba-crypto-lending-defi-mica-rules

Another day, another EU effort to regulate everything in sight, it seemed that they also want to regulate defi protocols. The thing is defi protocols are supposedly decentralized. With that in mind, how are they going to prevent their citizens from using the defi protocol that's NOT licensed?, are they going to enforce massive defi site blocking just like how China blocked some part of the internet using great wall? or are they going to consider any address interacted with the protocol as tainted? what do you think?

Hate to break it to you, but most "De-Fi" protocols aren't as decentralized as they claim to be. Developers are just using the term "decentralization" as some sort of buzzword to help attract people into their projects. This is why it's so easy to enforce regulations on so-called "DEXs" (decentralized exchanges) and/or "De-Fi" protocols. The EU has usually been in favor of "anti-crypto" policies. After all, it don't want the Euro to lose traction. Christine Lagarde (current President of the European Central Bank) is one of the most notable crypto haters. So, we should expect the worse from the bloc in the long run.

Ultimately, the EU's regulatory efforts will backfire, leading to an increase in truly-decentralized protocols that are impervious from regulation enforcement. We'll see what happens...

[Cashi]

DeFi is still very unregulated due to a lack of Regulation.
It is very hard to hold developers accountable for what is coded in each DeFi product.

[NeuroticFish]

Hate to break it to you, but most "De-Fi" protocols aren't as decentralized as they claim to be. Developers are just using the term "decentralization" as some sort of buzzword to help attract people into their projects. This is why it's so easy to enforce regulations on so-called "DEXs" (decentralized exchanges) and/or "De-Fi" protocols.

Nicely said, but imho a bit incomplete.
I expect EU politicians don't understand fully all the perks and they also expect the average Joe doesn't understand them.
And if they get some of the platforms "regulated" (i.e. paying tax) they are happy. Where they can they may block some IPs like they do for some of the gambling sites.
VPN and Tor will still work and they can't do anything about that, so the users just a tad more technical will be just fine.

The EU has usually been in favor of "anti-crypto" policies. After all, it don't want the Euro to lose traction. Christine Lagarde (current President of the European Central Bank) is one of the most notable crypto haters. So, we should expect the worse from the bloc in the long run.

On the long run Christine Lagarde will get retired from ECB. Actually in 2027 already. Sadly the main candidates to take her place are not significantly better.
On the long run POTUS will also change and I am truly curious what will be USA stance on crypto afterwards.
And then we will also see EU's move on crypto, if any. I don't expect really worse, but also not better, sadly.

[shinratensei_]

Hate to break it to you, but most "De-Fi" protocols aren't as decentralized as they claim to be. Developers are just using the term "decentralization" as some sort of buzzword to help attract people into their projects. This is why it's so easy to enforce regulations on so-called "DEXs" (decentralized exchanges) and/or "De-Fi" protocols. The EU has usually been in favor of "anti-crypto" policies. After all, it don't want the Euro to lose traction. Christine Lagarde (current President of the European Central Bank) is one of the most notable crypto haters. So, we should expect the worse from the bloc in the long run.

Ultimately, the EU's regulatory efforts will backfire, leading to an increase in truly-decentralized protocols that are impervious from regulation enforcement. We'll see what happens...

Even though that's the reality, but there are still handful of truly decentralized projects, ones that have their contract designed to be immutable, and uncontrolled by single entity like Uniswap where contracts are non-upgradeable and non-pausable with no admin keys, there are several others. The "decentralization" being simply a buzzword still true but only to some projects who said they are decentralized but keeping the users' money on a multisig setup where keys are being held by the founders.

On the long run Christine Lagarde will get retired from ECB. Actually in 2027 already. Sadly the main candidates to take her place are not significantly better.
On the long run POTUS will also change and I am truly curious what will be USA stance on crypto afterwards.
And then we will also see EU's move on crypto, if any. I don't expect really worse, but also not better, sadly.

It's really too bad for EU having anti crypto person as president of ECB. MiCA alone already sidelining thousands of smaller crypto firms because CASP license is expensive. If the main candidates aren't significantly better, the US is going to dominate everything crypto.