MiCA Gaps Fuel Industry Pushback as Crypto Firms Navigate Fragmented EU Rules

Crypto businesses operating across the European Union are confronting a patchwork of regulatory interpretations less than a year after the Markets in Crypto Assets Regulation took full effect, prompting a wave of formal submissions to Brussels that expose deepening fractures in the bloc’s landmark framework.

The Cardano Foundation’s 19-page filing to the European Commission, dated Sept. 30 and detailed in a Wednesday blog post, is the latest signal that MiCA’s treatment of decentralized finance and staking remains unresolved. The foundation argues that existing financial statutes — not new, technology-specific rules — should govern activities based on their economic function and risk profile.

“Regulation should follow the substance of an activity, the functions performed, and the risks created, not the technology through which it is conducted,” the foundation wrote.

The submission zeros in on a critical distinction: direct network participation versus intermediated services. On Cardano, ADA holders delegate tokens to secure the proof-of-stake network without transferring custody or locking assets — a mechanism the foundation says differs fundamentally from custodial staking products offered by exchanges or validators that control user funds.

That distinction has become a flashpoint. In September, the European Securities and Markets Authority recommended additional safeguards for staking, lending, and borrowing, plus a new regulated service category for firms providing access to DeFi protocols. ESMA‘s proposals would effectively extend MiCA’s perimeter into territory the regulation left ambiguous.

Industry participants warn that overlapping requirements and divergent national interpretations are already creating compliance paralysis. Legal teams at multiple EU-licensed crypto firms report spending disproportionate resources reconciling MiCA with pre-existing financial directives — particularly the Electronic Money Directive and the Payment Services Directive — whose interaction with the new regime remains untested in several member states.

The fragmentation extends beyond Europe. On Oct. 20, the Cardano Foundation joined five other blockchain organizations in a letter urging the U.S. Securities and Exchange Commission to formally classify digital commodities as non-securities under its proposed framework. The coordinated push reflects a broader industry strategy: pressing regulators on both sides of the Atlantic for definitional clarity that prevents regulatory arbitrage while preserving the technical distinctions that determine custody, control, and legal liability.

For now, the Commission has not signaled whether it will reopen MiCA or issue Level 2 guidance addressing DeFi and staking. ESMA’s recommendations await formal endorsement. Until then, firms operating across the 27-member bloc must navigate a regime that treats economically similar activities differently depending on whether they are mediated by code or by a licensed intermediary — a divergence the industry argues has no basis in consumer protection.