Cardano Foundation Urges EU: Keep DeFi and Staking Out of MiCA Expansion

The Cardano Foundation has submitted a formal position paper to the European Commission arguing that the EU should not create new, standalone regulations for decentralised finance or staking. The 19-page document, submitted on 30 September and summarised publicly in October 2026, has direct relevance for accounting firms, auditors, and CFOs who are currently working out how to classify client DeFi positions and staking arrangements under the existing MiCA framework. The core argument is that regulation should track the economic substance of an activity and the risks it generates, not the technology used to carry it out.

What the Submission Actually Says

The foundation's argument is built around a principle that will be familiar to anyone trained in financial regulation: substance over form. Rather than defining DeFi or staking as inherently new categories requiring bespoke rules, the submission asks the European Commission to assess whether a given activity resembles a regulated financial service in function and risk profile. If it does, existing law already covers it. If it does not, a new layer of regulation serves no protective purpose and creates legal noise.

The custody distinction at the heart of the case

The submission draws a specific and consequential line between two types of staking participation. On one side sits a user who delegates native tokens to help secure a decentralised network, retaining custody throughout and keeping tokens fully liquid. On the other side sits an intermediary, a custodian, a centralised exchange, or a staking-as-a-service provider, that takes control of user assets to perform the same function. The foundation argues these two activities carry fundamentally different risk profiles and should be treated accordingly under EU law.

That distinction matters enormously for accounting teams. The custody question is not merely regulatory; it determines the balance sheet treatment of staked assets, whether a lien or encumbrance needs to be disclosed, and how staking rewards are recognised as income. If an asset never leaves a client's control, the accounting treatment differs from a situation where a third party holds it, even temporarily. Any new regulatory category that collapses those two scenarios into one would produce reporting obligations that are either over-inclusive or analytically incoherent.

Overlapping frameworks and member-state inconsistency

The submission flags a second problem that accounting professionals will recognise immediately: regulatory overlap. MiCA is already in force across the EU, but it coexists with national transpositions of the Markets in Financial Instruments Directive, the Alternative Investment Fund Managers Directive, and anti-money-laundering rules. Where a DeFi activity touches multiple frameworks simultaneously, a firm operating in Germany faces a different compliance burden than one operating in France or the Netherlands, even for economically identical transactions.

The Cardano Foundation explicitly warned the Commission that inconsistent interpretations across member states create legal uncertainty for crypto businesses. For compliance teams using crypto bookkeeping software to record cross-border DeFi positions, that inconsistency translates into a practical audit problem: which national standard governs recognition, and what happens when two member states disagree?

ESMA's Parallel Proposals and Why They Matter

The foundation's submission did not emerge in a vacuum. In September 2026, the European Securities and Markets Authority published proposals that would introduce additional safeguards for staking, lending, and borrowing, alongside a new regulated service category for firms providing access to DeFi protocols. The Cardano Foundation's paper is, in part, a direct response to that direction of travel.

What ESMA is proposing

ESMA's approach would effectively create a gateway obligation: firms that route retail or institutional clients into DeFi protocols would be required to obtain authorisation under the new service category. That is a meaningful shift. Currently, a software provider or advisory firm that helps a client interact with a lending protocol sits in a regulatory grey area. Under ESMA's model, the act of providing access, even without taking custody, could trigger licensing requirements.

For accounting firms that advise clients on DeFi strategies, or that use digital asset accounting software to track protocol interactions on behalf of clients, the question of whether "providing access" extends to bookkeeping and reporting services is live and unresolved. The Cardano Foundation's preferred approach, regulating by function and risk rather than by technology category, would reduce the chance of advisory and accounting services being inadvertently captured.

The regulated intermediary argument

Where the foundation and ESMA arguably agree is on intermediaries. Both positions suggest that firms which sit between users and DeFi protocols, particularly those that hold or control assets at any point, should face regulatory scrutiny. The disagreement is over whether that scrutiny requires an entirely new category or whether existing MiCA provisions and financial services law already supply adequate tools. The Commission must now decide which path creates a more coherent and enforceable framework.

Accounting and Reporting Implications for EU Firms

Whatever the Commission ultimately decides, accounting teams cannot afford to wait. The direction of regulatory travel is clear enough to require action now, and the documentation you build today will determine how defensible your positions are when any new rules land.

Classifying staking arrangements under current standards

Under IFRS and most EU GAAP frameworks, the accounting treatment of staked digital assets depends primarily on whether the firm retains the risks and rewards of ownership during the staking period and whether the asset is subject to any restriction on transfer or disposal. A self-custody delegation arrangement, where the token remains on-chain and accessible to the owner, is likely to remain on the holder's balance sheet as a digital asset. A custodial staking arrangement, where a third party controls the asset, may need to be assessed for derecognition or disclosure of a contractual restriction.

Staking rewards present a separate question. Are they income on receipt, or do they represent a capital accretion that adjusts the cost basis of the original holding? Current IFRS guidance does not address staking rewards directly, and EU member states have taken different positions in their tax and accounting guidance. The Cardano Foundation's submission, if it succeeds in preserving the custody distinction in regulation, would at least give standard-setters a cleaner conceptual basis on which to build accounting guidance.

AML and KYC obligations for DeFi access

The AML dimension of ESMA's proposed DeFi service category is significant. If providing access to a DeFi protocol becomes a regulated activity, firms in that category will almost certainly face customer due diligence and transaction monitoring obligations under the EU's AML framework. That is a non-trivial operational burden, particularly for protocols where counterparty identity is pseudonymous by design.

Accounting and compliance teams using crypto accounting software to track client DeFi interactions should already be tagging transactions by protocol, wallet address, and custody status. If ESMA's category is enacted, those tags will form the baseline data for AML reporting. Firms that have not built that data infrastructure now will face a costly retrofit. For a broader view of how AI-driven tools are being used to address exactly this supervisory challenge, see our analysis of how DeFi and traditional finance convergence is reshaping EU compliance obligations.

Cross-border consistency and audit risk

One of the least-discussed but most practically significant points in the Cardano Foundation's submission is the member-state consistency problem. An EU-wide accounting firm with clients in multiple jurisdictions already manages divergent national guidance on crypto asset treatment. Adding a new DeFi-specific regulatory layer that is interpreted differently in each member state compresses audit timelines and increases the risk of material misstatement simply through jurisdictional inconsistency.

The foundation's preferred outcome, a single, function-based standard applied uniformly across the EU, would reduce that audit risk substantially. It is worth monitoring how the Commission's response engages with this point, because it has implications well beyond the Cardano ecosystem. For context on the broader debate about where regulatory responsibility should sit in decentralised systems, see our piece on the debate over regulating DeFi deployers rather than the underlying protocol.

The US Dimension

The Cardano Foundation is not limiting its regulatory engagement to Europe. The submission notes that the foundation, alongside five other blockchain organisations, has separately urged the US Securities and Exchange Commission to formally recognise digital commodities as non-securities under its proposed crypto framework. The parallel advocacy reflects a broader industry effort to shape regulatory definitions before they harden into law on both sides of the Atlantic.

For EU-based firms with US clients or US-domiciled token exposure, the divergence between SEC classification and MiCA classification of the same asset remains a live operational risk. A token treated as a commodity under a future US framework but as a crypto asset service under MiCA creates conflicting reporting obligations that no amount of crypto bookkeeping software resolves without a clear legal determination.

What Compliance Teams Should Do Now

The Commission's response to the foundation's submission, and to ESMA's parallel proposals, is not yet published. That gap is not a reason to pause. The following steps are defensible regardless of which regulatory path the EU ultimately takes.

Practical steps for accounting firms and CFOs

First, audit every staking arrangement in your client portfolio and classify it by custody status. Document whether the client retains control of private keys throughout the staking period or whether a third party holds assets on their behalf. That documentation will be essential under any regulatory outcome.

Second, review how your digital asset accounting software records DeFi protocol interactions. Ensure that each transaction is tagged with the protocol address, the custody model, the jurisdiction of the intermediary if one is involved, and the nature of any reward or yield generated. Retrofitting that data later is expensive and error-prone.

Third, track the Commission's response to ESMA's September proposals. The consultation period is active, and the definition of "providing access to DeFi protocols" will be the pivotal phrase. If your firm's services could fall within a broad reading of that definition, seek legal advice before the category is enacted rather than after.

Fourth, engage with your national competent authority's guidance on staking income. Several EU member states have published informal guidance, and while it carries no binding force, it signals the direction of domestic interpretation and can inform your interim accounting treatment.

Frequently Asked Questions

Does the Cardano Foundation's submission change anything right now?

No. It is a formal position paper submitted to the European Commission as part of a consultation process. It carries no legal force. Existing MiCA rules and national financial services laws continue to apply unchanged until the Commission publishes its response and any resulting legislative proposal.

How should self-custody staking rewards be recorded under current EU accounting standards?

There is no single binding IFRS or EU GAAP standard specifically addressing staking rewards. Most practitioners recognise rewards as income at fair value on the date they are received, with the cost basis of the original holding unchanged. Some jurisdictions treat them as capital accretion. You should document your chosen policy, apply it consistently, and review it if national guidance is updated.

Could ESMA's proposed DeFi service category capture accounting or advisory firms?

Potentially, depending on how "providing access" is defined in the final text. If the category is drawn narrowly to cover only firms that route transactions or hold assets, most pure accounting and advisory relationships will sit outside it. If it is drawn broadly, firms that recommend or facilitate DeFi interactions for clients may need to assess their licensing position. Legal advice specific to your service model is essential before the category is enacted.

What is the practical difference between MiCA and the proposed new DeFi category?

MiCA governs the issuance and trading of crypto assets and the firms that provide crypto asset services, such as custody, exchange, and advice. The proposed DeFi service category would address firms that provide access to decentralised protocols, a function that MiCA does not currently regulate explicitly. The Cardano Foundation argues that existing MiCA and financial services law already cover any genuinely risky intermediary functions without a new category being needed.

Where can I find the Cardano Foundation's full submission?

The foundation published a blog post on the submission in October 2026 and noted that the full 19-page document was submitted to the European Commission on 30 September 2026. The European Commission's public consultation portal is the authoritative location for registered submissions.

Source: Cointelegraph Regulation