Malta’s financial regulator has proposed a new legal category for decentralized autonomous organizations as part of a consultation on how to regulate decentralized finance under the European Union’s cryptocurrency framework.
summary
- Malta’s MFSA has proposed a new category of “software-based organisations” which will include DAOs and other DeFi entities.
- The regulator said that many DeFi projects may not qualify as fully decentralized under MiCA due to concentrated governance.
- This consultation comes as EU regulators review oversight of decentralized finance ahead of the implementation deadline set by MiCA of July 1, 2026.
According to a discussion paper published by the Malta Financial Services Authority on June 12, the regulator has opened a public consultation running until July 10 seeking industry feedback on a potential framework for DeFi activities.
The proposal introduces the concept of “software-based organizations,” a category that would cover decentralized autonomous organizations and other blockchain-based entities that are primarily controlled 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 in which it operates.
The regulator argued that separating these elements could help address governance and accountability issues that continue to arise across DeFi projects.
Malta is seeking a legal structure for software-managed entities
In the consultation paper, the Department for Financial Services noted that fully decentralized services generally remain outside the scope of EU markets for crypto-asset regulation. At the same time, the regulator said that many projects defined as decentralized still retain elements of central control, making the regulatory classification more complex.
“MiCA excludes decentralized models entirely 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 cryptocurrency framework in 2018, the proposal attempts to address questions that are becoming more pressing as regulators examine how decentralized finance systems operate in practice.
Recent research has added to these concerns. And in March a Worksheetr from the European Central Bank that governance and decision-making across four major DeFi protocols remained concentrated among a limited group of participants.
According to the ECB paper, this focus may make it difficult for some projects to qualify as fully decentralized under MiCA.
EU scrutiny of DeFi grows ahead of MiCA implementation
Elsewhere in Europe, policymakers continue to review whether MiCA adequately addresses decentralized finance. In May, the European Commission launched a targeted review of the regulation and requested comments on several topics, including interest payments on stablecoins, DeFi activity, and potential gaps that may require additional rules.
The discussion arrives as EU regulators prepare for The final stage 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 a license will no longer be allowed to serve clients on the block.
According to the European Securities and Markets Authority, companies operating without a MiCA license after the deadline would be in breach of EU law.
ESMA also said that service providers who fail to obtain a license must put in place structured termination plans and help customers move assets either to approved companies or self-hosted wallets.
The data cited by Hogan Lovells illustrates the scale of the shift. The law firm reported that Europe had more than 3,000 virtual asset service providers in 2024, however, only 194 approved crypto asset service providers, including credit institutions, had received approval by May 2026.
Against this background, the Malta consultation adds another piece to the debate on how European regulators should deal with organizations that operate by code while maintaining specific governance structures.
Disclosure: This article does not constitute investment advice. The content and materials contained on this page are for educational purposes only.
