MiCA II: EU Regulatory Shift Targets Decentralized Finance
The European Commission has closed its consultation on the Markets in Crypto-Assets (MiCA) review, marking the beginning of MiCA II, a regulatory shift that directly targets decentralized finance (DeFi) and crypto-fiat on-ramps.
The review aims to clarify provisions that carved out decentralized protocols but left ambiguity around when a DeFi protocol becomes an obliged entity under anti-money laundering (AML) rules.
Policymakers face a dilemma: defining obligations clearly enough to be enforceable, while preserving the permissionless core of DeFi. The current review examines 'gap cases,' including DeFi protocols, governance token-based DAOs that control treasuries, and crypto-fiat on-ramps that sit between wallets and traditional bank accounts.
The MiCA II framework is designed to close the loophole that left DAO treasury management and self-custody operations largely outside the regulatory perimeter. The regulation will require a documented KYB trail for every fiat inflow and outflow from a DeFi wallet, tightening compliance for startups and DAOs that convert treasury tokens to EUR or USD.
For businesses operating in the EU, MiCA sets the minimum standard for market access. However, other regimes can be stricter. Building a compliance posture that meets the EU's standard today positions a startup to adapt quickly when other jurisdictions follow.