Malta’s financial regulator has introduced a novel legal classification for decentralized autonomous organizations as part of a public consultation on regulating decentralized finance under the European Union’s crypto asset rules. The Malta Financial Services Authority released a discussion paper on June 12, seeking industry input through July 10 on a potential framework for DeFi activities. The proposal creates a category called “software-based organizations,” which would encompass DAOs and other blockchain entities primarily governed by code. Instead of establishing a dedicated legal structure solely for DAOs, the MFSA suggests that this category could offer a legal identity separate from the protocols and software the organizations operate. The regulator argues that distinguishing these elements could resolve governance and accountability issues frequently observed in DeFi projects.
The consultation paper notes that fully decentralized services generally fall outside the scope of the EU’s Markets in Crypto-Assets regulation. However, many projects claiming to be decentralized still exhibit centralized control, complicating regulatory classification. MiCA excludes fully decentralized models from its scope, meaning such projects may not need to comply. Malta’s proposal builds on its early digital asset regulation from 2018 and addresses growing concerns about DeFi governance. A March European Central Bank working paper found that four major DeFi protocols had concentrated governance among a small group of participants, potentially preventing them from qualifying as fully decentralized under MiCA.
European policymakers are intensifying scrutiny of DeFi ahead of MiCA’s final enforcement deadline on July 1, 2026. In May, the European Commission launched a targeted review of MiCA, seeking feedback on stablecoin interest payments, DeFi activity, and potential regulatory gaps. After the transition period, crypto exchanges, brokers, and wallet providers without authorization will be barred from serving EU customers. The European Securities and Markets Authority warns that firms operating without a MiCA license after the deadline would violate EU law and should prepare orderly wind-down plans. Data from Hogan Lovells shows that Europe had over 3,000 virtual asset service providers in 2024, yet only 194 had obtained authorization by May 2026. Malta’s consultation adds to the debate on how European regulators should treat code-governed organizations with identifiable governance structures.