Crypto: Malta wants to impose rules on DAOs in the MiCA era

Malta wants to regulate DAOs and certain decentralized finance protocols in the MiCA era. The regulator seeks above all to distinguish true decentralized crypto projects from organizations which retain human control behind their smart contracts.

Crypto: Malta wants to identify those responsible for DAOs

The Malta Financial Services Authority is proposing to create a legal category for “software-based organizations”. It could cover DAOs, certain DeFi protocols and other crypto structures whose operation relies largely on smart contracts.

This initiative seeks to resolve a question that has become central in the industry: who bears responsibility when a protocol suffers a breach, blocks funds or makes a contested decision? The subject joins the debate on the status of DAOs, which is still unclear in many jurisdictions.

Malta wants to separate the organization from its software. On one side are the members, developers and governance token holders. On the other, the protocol executed on the blockchain. This distinction could help the regulator know who actually controls a crypto infrastructure.

The MiCA regulation regulates issuers of crypto-assets and service providers in the European Union. But services provided in a completely decentralized manner may remain outside its scope.

This exception creates a gray area. Many crypto projects present themselves as autonomous while a team can still modify the code, suspend certain functions or control the interface used by the majority of users.

The Maltese regulator therefore wants to examine the facts rather than slogans. The use of a blockchain is not enough to prove decentralization. A protocol can hold community votes while letting a few founders retain real power. This difficulty is already fueling discussions around future DeFi regulation.

Crypto projects will be judged on their actual control

The MFSA could analyze the distribution of governance tokens, the role of developers and the powers granted to certain wallets. These elements make it possible to assess whether a DAO really works without a dominant decision center.

A crypto organization can appear open while remaining controlled by a small group. When a few addresses have the majority of voting rights, other members often have limited influence. Governance then becomes decentralized only in appearance.

Administrative keys are another important signal. If a team can modify a smart contract, interrupt transactions, or recover funds, they have identifiable technical authority. In this case, the authorities could consider that the project must respect obligations close to those imposed on traditional organizations.

Legal recognition could bring several benefits to DAOs. They could sign contracts, employ collaborators, manage accounts and clarify the responsibility of their members. This would also facilitate relations with banks and institutional investors.

However, there is a risk of producing a frame that is too heavy. If each participant in a DAO can be held responsible for collective decisions, some crypto projects could leave Malta or avoid the European Union altogether.

The regulator will therefore have to find a balance. It must protect users without removing the benefits of onchain governance. Too little oversight would leave investors exposed. Excessive regulation could shift innovation to less stringent jurisdictions.

The public consultation remains open until July 10, 2026. Its outcome will be observed well beyond Malta. Already facing criticism over its application of the MiCA framework, the country now wants to become a European laboratory for crypto regulation. The real challenge will be to determine where the code ends and human responsibility begins.