U.S. DeFi Organization Urges UK FCA Not to Treat Non-Custodial Protocol Developers as Intermediaries

Odaily News The U.S. DeFi organization DeFi Education Fund (DEF) has recommended that the FCA adopt a functional "control" definition when formulating new regulations for crypto assets. This would limit regulatory responsibility to entities that have unilateral control over user funds or transactions, rather than those merely participating in the development or contribution to decentralized protocols. DEF emphasized that regulation should focus on specific operational capabilities, such as initiating or blocking transactions, modifying protocol parameters, or excluding users. Otherwise, software developers could be incorrectly subjected to intermediary-type obligations. DEF also pointed out that applying prudential, reporting, and access requirements designed for centralized trading platforms to non-custodial automated protocols is inappropriate. It further stated that decentralized protocols have advantages in terms of transparency and combating illicit financial activities. This recommendation responds to the UK Financial Conduct Authority's (FCA) consultation on how to incorporate DeFi into its digital asset framework. DEF supports the principle of control being central but stresses the need to link it to actual operational power. (CoinDesk)