MiCAR’s Impact on DeFi and Decentralization Myths
- MiCAR Recital 22 states that services provided in a “fully decentralized manner without any intermediary” fall outside its scope, but achieving this is rare.
- Regulators assess actual operational control rather than marketing claims, with operators maintaining administrative keys or control falling within MiCAR’s scope.
- Decentralization is not binary, as ESMA views it on a spectrum, scrutinizing projects with identifiable entities exercising control over protocol upgrades or governance.
- DeFi platforms relying on public, permissionless blockchains are considered “common goods,” yet functional control over smart contracts brings operators under MiCAR.
- Developers of non-custodial software are not automatically classified as CASPs unless they retain significant influence over crypto-assets or user relationships.
The European regulatory bodies emphasize that achieving full decentralization to avoid MiCAR compliance is exceptionally rare due to the nuanced nature of control and governance in DeFi projects. The regulation scrutinizes the actual degree of decentralization beyond technical claims, focusing on operational realities.
Substance-over-form assessments dictate compliance with MiCAR, where even permissionless infrastructure does not exempt operators if they maintain functional control over their platforms. (Source)
