Aave Labs advocates for EU to regulate crypto intermediaries rather than software under MiCA review, emphasizing self-custody protection and lending yield preservation.
Regulation & Gov ·
Aave Labs has called on European regulators to focus MiCA oversight on crypto intermediaries rather than software protocols, arguing this approach would better protect self-custody rights and preserve lending yields during the regulation's review phase. The position reflects ongoing debate over how the EU's Markets in Crypto-Assets Regulation should apply to decentralized finance and non-custodial platforms, where users retain direct control of their assets. The exact scope of software regulation under MiCA remains contested, with industry stakeholders seeking clarity on whether decentralized protocols themselves—as opposed to service providers offering access to them—should face licensing and compliance burdens. Aave Labs's position underscores tension between consumer protection goals and functional constraints in DeFi, where centralized intermediaries may be unable to deliver certain services without regulatory framework adjustments. The EU has framed MiCA as innovation-friendly, yet questions persist about how a software-first regulatory model would affect lending protocols, yield mechanisms, and the feasibility of non-custodial finance under the bloc's rules.