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EU's Ambitious Plans for DeFi Regulation: What to Expect by 2026

As Europe prepares to address decentralized finance (DeFi), significant regulatory developments are on the horizon.

The Markets in Crypto-Assets Regulation (MiCA), which aims to create a comprehensive crypto regulatory framework, will take effect on December 30, 2024.

However, many unresolved questions remain regarding the definition and treatment of DeFi within this framework.

Vyara Savova from the European Crypto Initiative highlighted the current regulatory limbo surrounding DeFi protocols during a recent Cointelegraph event.

She noted that regulatory interpretations concerning decentralization are expected to start emerging around mid-2026.

Criticism of the initial MiCA framework has surfaced, particularly concerning its treatment of decentralized protocols which may be subjected to traditional licensing and KYC requirements.

Despite provisions in the bill suggesting that "fully decentralized" entities should be excluded from MiCA’s scope, clarity remains elusive.

Lawmakers will continue revising MiCA every 12 to 18 months to fill existing regulatory gaps.

Additionally, while discussions around stablecoins and other crypto regulations are ongoing, a comprehensive MiCA II framework is unlikely to emerge soon.

New Anti-Money Laundering rules, which target privacy coins and anonymous accounts, are expected to roll out in 2027 as the EU strengthens its regulatory approach towards the crypto landscape.