The Cardano Foundation urges the EU not to introduce new, separate regulatory rules for decentralized finance (DeFi) and staking, but rather advocates that existing financial laws should regulate these activities based on the functions and risks of the related activities, rather than on the technology used.

In a blog post published on Wednesday, the foundation outlined its 19-page opinion submitted to the European Commission on September 30, calling for a distinction to be made between those who directly participate in decentralized networks and financial services provided by intermediaries, especially those involving the custody or control of users' assets.

The foundation writes: "Regulation should follow the substance of an activity, the functions it performs, and the risks it generates, rather than the technology upon which its implementation relies."

The foundation stated that Cardano users can delegate their native ADA ( ADA ) tokens to help maintain network security, without having to relinquish custody rights or lock up their tokens. Therefore, this type of participation should be treated differently from the staking services operated by intermediary institutions.

The submitted document also calls for a clearer distinction between the EU's 'Regulation on the Markets in Crypto Assets' ( MiCA ) and existing financial laws, and warns that overlapping requirements and inconsistent interpretations among member states may bring uncertainty to crypto enterprises.

As EU regulatory authorities consider expanding the scope of regulation over crypto services, the stance of various foundations has also come into focus. In September, the European Securities and Markets Authority (ESMA) recommended adding additional safeguards for pledging, lending, and borrowing, and proposed establishing a new category of regulated services for companies that provide access to the DeFi protocol to users.

The Cardano Foundation is also pushing for clearer regulatory rules on the other side of the Atlantic. On October 20th, the foundation, together with five other blockchain organizations, wrote a letter to the U.S. Securities and Exchange Commission (SEC), urging it to officially recognize that digital assets do not constitute securities under the proposed crypto framework.

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