DeFi Education Fund says developers of non-custodial protocols should not be regulated as intermediaries under the U.K.’s proposed crypto regime.
What to know:
- The DeFi Education Fund tells FCA that regulatory obligations should apply only where there is “unilateral control” over user assets or transactions.The U.S.-based group argues non-custodial DeFi developers should not be treated like centralized intermediaries.DEF warns that applying trading platform and prudential requirements and full money-laundering laws to automated protocols would be structurally incompatible.
The DeFi Education Fund (DEF) has urged the U.K.’s Financial Conduct Authority to adopt a narrow, functional definition of “control” as it finalizes new rules for crypto asset activities.
The Washington, D.C.-basedadvocacy groupargued that regulatory obligations should hinge on whether an entity has unilateral authority over user funds or transactions, not merely whether it developed or contributed to a decentralized protocol, in a response to an FCA consultation paper shared exclusively with CoinDesk.
“Control should be the determinative factor” of regulatory scope, DEF said, warning that software developers could otherwise be swept into intermediary-style obligations despite lacking custody or transactional authority.
The submission focuses on an area of the consultation which considers how decentralized finance (DeFi) arrangements should be treated under the U.K.’s emerging crypto regime. DEF supports the FCA’s control-based approach in principle but says it must be tied to concrete operational powers, such as the ability to initiate or block transactions, modify protocol parameters or exclude users.
DEF is an organization focused on informing policymakers and regulators about the benefits of DeFi and has beenone of the prominent lobby groupson the road to crypto regulatory frameworks being established in Washington in recent years.
The group also challenged the FCA’s framing of DeFi-specific risks, arguing that cybersecurity vulnerabilities are not unique to blockchain systems and that public blockchains offer transparency advantages in combating illicit finance.
Applying prudential, reporting and platform access requirements designed for centralized trading platforms to non-custodial, automated protocols would be “ill-suited,” DEF said.
The FCA is seeking to bring a broad range of crypto activities within its regulatory perimeter as the U.K. movestoward a comprehensive digital asset framework.
Read More:UK regulators start major consultation on crypto listings, DeFi, and staking
More For You
Accelerating Convergence Between Traditional and On-Chain Finance in 2026?
More For You
Crypto group counters Wall Street bankers with its own stablecoin principles for bill
After the bankers shared a document at the White House demanding a total ban on stablecoin yield, the crypto side answers that it needs some stablecoin rewards.
What to know:
- The U.S. Senate's crypto market structure bill has been waylaid by a dispute over something that's not related to market structure: yield on stablecoins.The Digital Chamber is offering a response to a position paper circulated earlier this week by bankers who oppose stablecoin yield.The crypto group's own principles documents argues that certain rewards are needed on stablecoin acvitity, but that the industry doesn't need to pursue products that directly threaten bank deposits business.