France is spearheading a major regulatory push to hold centralized cryptocurrency platforms financially and legally liable for decentralized finance (DeFi) incidents if they fail to properly vet underlying protocols or deliberately ignore known security risks.
In a joint policy document published Wednesday, key French financial authorities outlined a comprehensive set of proposals aimed at overhauling the European Union’s landmark Markets in Crypto-Assets Regulation (MiCA). The coordinated response to an ongoing European Commission consultation was drafted and released by the French Treasury, the country’s Financial Markets Authority (AMF), the central bank, and the Prudential Supervision and Resolution Authority (ACPR).
At the heart of the French proposal is the principle that centralized intermediaries cannot completely shield themselves from liability when guiding everyday retail investors into the largely unregulated and high-risk waters of decentralized finance. According to the French authorities, crypto-asset service providers (CASPs) should face direct liability for specific types of security incidents affecting clients where these platforms have actively facilitated user access to third-party DeFi protocols.
While the current text of MiCA explicitly excludes crypto services that are provided in a fully decentralized manner without the use of traditional intermediaries, the French framework seeks to close what it views as a dangerous regulatory loophole. By imposing new, proactive duties on regulated platforms that act as bridges connecting mainstream customers to complex DeFi applications, the proposal aims to significantly extend investor safeguards across the broader European digital asset ecosystem.
The European Commission is currently reviewing whether MiCA requires legislative updates as digital asset markets continue to mature and evolve. The Commission’s recent public consultation was specifically designed to gather industry and regulatory feedback on activities that originally fell outside the legal scope of the initial legislation, with DeFi sitting near the top of that list. The responses gathered from member states and industry stakeholders will directly inform a comprehensive report that must be submitted to EU lawmakers by June 30, 2027. That report could ultimately include formal legislative proposals to amend the existing law.
DeFi Access Could Come With New Obligations
Under the regulatory changes proposed by French authorities, platforms would be subjected to strict mandates requiring them to thoroughly vet individual DeFi protocols before offering their customers access to them. Furthermore, these platforms would be expected to continuously monitor the protocols for emerging vulnerabilities, technical flaws, and suspicious transactional activity.
To streamline this process and ensure higher safety standards across the bloc, the French regulators also threw their weight behind the formal certification of protocols and smart contracts, coupled with explicit platform liability for security breaches or financial exploits that directly harm users.
These rigorous requirements would apply fully to major, systemically important CASPs operating within the European Union, while obligations would be appropriately scaled down and tailored for smaller providers to prevent an unfair regulatory burden on emerging startups.
Importantly, the proposed framework would not entirely cut off European investors from experimental or innovative decentralized networks. Platforms would still be permitted to connect their customers to uncertified protocols, provided they conduct their own rigorous due diligence and furnish users with enhanced, transparent risk disclosures regarding the potential pitfalls of the underlying technology.
When turning their attention to non-custodial and self-custodial wallets, the French authorities took a more measured approach. They firmly opposed blanket certification requirements for all wallet developers, recognizing the technical impracticality and stifling effect such a rule would have on open-source innovation. Instead, they expressed support for a voluntary certification model specifically targeted at more advanced wallets that choose to natively integrate complex DeFi services and yield-generating features.
France Pushes for Wider MiCA Overhaul
The recommendations put forward by French regulators extend far beyond the realm of decentralized finance, touching upon several structural aspects of how the entire European crypto sector is governed and supervised.
Most notably, France backed institutional plans to strip national regulators of their supervisory authority over the largest digital asset platforms, proposing instead to transfer the direct oversight of "significant CASPs" entirely to the European Securities and Markets Authority (ESMA).
To ensure that major cross-border players do not slip through the cracks, the authorities proposed lowering MiCA’s current threshold for identifying significant CASPs. Under the existing rules, a platform must reach an average of 15 million daily active users in the European Union to trigger heightened oversight. France suggested that regulators should also consider other critical metrics when determining which platforms fall under ESMA’s direct supervision, including the total volume of custody assets held, inherent business risks, and overall corporate group complexity.
France also called for a critical review of MiCA’s asset-referenced token category, which covers digital tokens designed to maintain a stable value by referencing underlying assets, baskets of assets, or a combination thereof. The authorities pointed out that no asset-referenced tokens had successfully been authorized under the MiCA regime as of yet, and they proposed adapting the existing e-money token framework to better accommodate and regulate multicurrency stablecoins.
As European regulators prepare for the upcoming legislative reviews and the 2027 reporting deadline, the French proposals signal a growing determination among national authorities to ensure that investor protection keeps pace with financial innovation in the digital asset space.
