EU Regulator Proposes Licensing Companies Connecting Investors to DeFi Protocols
ESMA, the European Union's securities regulator, has proposed licensing companies that connect investors to decentralized finance (DeFi) protocols. The proposal aims to regulate firms providing access to DeFi, staking, lending, and borrowing services.
The new regulated crypto-asset service would require these firms to disclose information about conflicts of interest, transaction routing, and costs. However, the contracts themselves would remain untouched.
ESMA's proposal also calls for clearer criteria to determine which activities are genuinely decentralized. The regulator wants to ensure that only truly decentralized protocols are exempt from regulations.
The proposed rules could affect how people in the EU access DeFi through interfaces. It is unclear at this stage whether established Ethereum protocols, such as Aave V4 and Circle's Arc, would be classified as regulated gateways or fall within the proposed definition.