Bitcoin (BTC) and altcoins have fallen again due to the uncertainty brought about by the US-Iran war.

Bitcoin has fallen by more than 5% in the last 24 hours to around $65,000, while Ethereum and altcoins are also experiencing significant losses.

While developments in the Middle East are being closely monitored to see if these declines will continue, the European Central Bank has put four altcoins under the microscope.

Accordingly, the European Central Bank (ECB), in a recently published working paper, identified the possibility that some decentralized finance projects may not be able to benefit from the European Union Crypto Asset Markets (MiCA) exemptions.

Accordingly, the ECB found that governance across the four major DeFi protocols is highly concentrated.

The ECB report examined Aave (AAVE), MakerDAO (now SKY), Ampleforth (AMPL), and Uniswap (UNI).

The report stated that more than half of the tokens are typically tied to the protocol team or exchanges, and that the top 100 holders in each protocol control more than 80% of the supply.

It was also noted that key voting participants are often authorized representatives rather than direct token holders, and that the majority of these individuals are not publicly disclosed. More importantly, the report states that verifying the identities of these authorized representatives or linking them to the actual token holders is often impossible.

This uncertainty also creates a significant regulatory gap.

It is argued that, due to the excessive centralization of decision-making power at this point, these DeFi protocols may not be eligible for the exemptions under the MICA regulation.

Because MiCA currently excludes “fully decentralized” services. In other words, to benefit from the MiCA exemption, you need to be decentralized.

At this point, the inability to benefit from the MiCA exemption has serious consequences. Protocols that cannot benefit from the exemptions will need to obtain official authorization as crypto asset service providers within the EU. This process necessitates strict capital requirements, governance standards, and consumer protection measures.

In conclusion, this report questions whether DeFi DAOs possess sufficient decentralization to be exempt from the MiCA regulatory framework.

*This is not investment advice.

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