Malta's financial regulator has proposed a new legal category for decentralized autonomous organizations as part of a consultation on how decentralized finance could be regulated under the European Union's crypto framework. According to a discussion paper published by the Malta Financial Services Authority on June 12, the regulator has opened a public consultation running through July 10 that seeks industry feedback on a potential framework for DeFi activities. The proposal introduces the concept of 'software-based organizations', a category that would cover DAOs and other blockchain-based entities governed primarily through software. This represents one of the first concrete attempts in Europe to write DAO structures into regulatory text rather than leaving them in a regulatory gray zone, as reported by crypto.news.
The MFSA is seeking feedback on whether decentralization should be assessed as a spectrum rather than a binary concept, marking a significant shift in regulatory thinking. As reported by multiple sources, the regulator is taking a closer look at how decentralized finance could be regulated under the European Union's Markets in Crypto-Assets framework, with a particular focus on governance, accountability, and the definition of decentralization. The MFSA noted that fully decentralized services generally remain outside the scope of MiCA, as reported by the regulator. However, the regulator said many projects that identify as decentralized still retain elements of centralized control, making regulatory classification more complex. 'MiCA excludes fully decentralised models from its regulatory scope, meaning that projects without intermediaries or central control may not need to comply with MiCA,' the MFSA stated in the consultation paper.
Recent research has added to regulatory concerns about DeFi governance structures. In March, a working paper from the European Central Bank found that governance and decision-making across four major DeFi protocols remained concentrated among a limited group of participants. According to the ECB paper, that concentration could make it difficult for some projects to qualify as fully decentralized under MiCA, as reported by the regulator. The proposal attempts to address these questions that have become more pressing as regulators examine how DeFi systems operate in practice. However, the open question remains how a DAO category would handle liability: if a protocol's contracts cause losses, who answers for it under the proposed regime. The MFSA's approach reflects this tension by focusing on governance and responsibility—areas that directly affect how supervision and enforcement might work.
The discussion arrives as EU regulators prepare for the final phase of MiCA implementation, with the transition period ending on July 1, 2026. As previously reported by crypto.news, the transition period ends after which crypto exchanges, brokers, and wallet providers without authorization will no longer be permitted to serve customers in the bloc. According to the European Securities and Markets Authority, firms operating without a MiCA license after the deadline would be in breach of EU law. ESMA also said providers that fail to obtain authorization should establish orderly wind-down plans and help customers transfer assets to either authorized firms or self-hosted wallets. In May, the European Commission initiated a targeted review of MiCA, requesting feedback on several topics including stablecoin interest payments, DeFi activity, and potential gaps that could require additional rules.
Data cited by Hogan Lovells illustrates the scale of the transition facing European regulators. The law firm reported that Europe had more than 3,000 virtual asset service providers in 2024, yet only 194 authorized crypto-asset service providers, including credit institutions, had obtained approval by May 2026. The European Commission launched a targeted review of MiCA in May, requesting feedback on several topics including stablecoin interest payments, DeFi activity, and potential gaps that could require additional rules. Building on Malta's early involvement in digital asset regulation, including the introduction of a crypto framework in 2018, the proposal adds another piece to the ongoing debate over how European regulators should treat organizations that operate through code while still maintaining identifiable governance structures. Recent market activity shows Injective has processed $4.15 billion in tokenized equities trading, with the broader on-chain stock market pushing past $1.6 billion in value, according to figures circulating around the network.
