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.
Summary
- Malta’s MFSA has proposed a new “software-based organization” category that would include DAOs and other DeFi entities.
- The regulator said many DeFi projects may not qualify as fully decentralized under MiCA due to concentrated governance.
- The consultation comes as EU regulators review DeFi oversight ahead of MiCA’s July 1, 2026, enforcement deadline.
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.
Rather than creating a separate legal framework exclusively for DAOs, the MFSA said software-based organizations could provide a legal structure that distinguishes the organization itself from the protocols and code it operates.
The regulator argued that separating those elements could help address governance and accountability issues that continue to emerge across DeFi projects.
Malta seeks legal structure for software-governed entities
Within the consultation paper, the MFSA noted that fully decentralized services generally remain outside the scope of the European Union’s Markets in Crypto-Assets regulation. At the same time, 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.”
Building on Malta’s early involvement in digital asset regulation, including the introduction of a crypto framework in 2018, the proposal attempts to address questions that have become more pressing as regulators examine how DeFi systems operate in practice.
Recent research has added to those concerns. 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.
EU scrutiny of DeFi grows ahead of MiCA enforcement
Elsewhere in Europe, policymakers continue reviewing whether MiCA adequately addresses decentralized finance. In May, the European Commission launched a targeted review of the regulation and requested feedback on several topics, including stablecoin interest payments, DeFi activity, and potential gaps that could require additional rules.
The discussion arrives as EU regulators prepare for the final phase of MiCA implementation. As previously reported by crypto.news, the transition period ends on July 1, 2026, 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.
Data cited by Hogan Lovells illustrates the scale of the transition. 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.
Against that backdrop, Malta’s consultation adds another piece to the ongoing debate over how European regulators should treat organizations that operate through code while still maintaining identifiable governance structures.
Disclosure: This article does not represent investment advice. The content and materials featured on this page are for educational purposes only.
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