French Authorities Push EU to Make Crypto Exchanges Screen DeFi Protocols for Users

Introduction

French financial authorities – the Treasury, AMF, Banque de France and ACPR – have submitted a joint response to the European Commission’s MiCA review, urging the EU to make crypto‑asset service providers (CASPs) responsible for the DeFi protocols they expose to users. Rather than banning decentralized finance, the proposal calls for a framework of due‑diligence, ongoing monitoring, and an independent certification scheme to ensure that platforms assess protocol risks before granting access.

Three‑pillar framework for CASPs

1. Due diligence and ongoing monitoring – Before offering a DeFi protocol, a platform must evaluate its decentralisation level, audit history, governance model, liquidity, oracle and bridge risks, and any links to illicit activity. Continuous monitoring would track emerging vulnerabilities or regulatory red flags.
2. Protocol certification – An independent body would issue on‑chain certificates lasting three years for significant, fully‑decentralised protocols (e.g., those above a TVL threshold). Certificates would be recorded on the blockchain, providing a transparent signal of compliance. Absence of a certificate would not automatically block access, but platforms would need to disclose the lack and conduct their own review.
3. CASP liability – Platforms that actively facilitate access to DeFi would be liable for certain client losses if they failed to perform adequate due diligence, ignored known weaknesses, or maintained access despite clear signs of illicit activity. The exact scope of liability for assets deposited in a protocol remains to be clarified by the Commission and European Supervisory Authorities.

Practical implications for exchanges and users

• Pre‑access pop‑ups – The authorities recommend a clear acknowledgment screen informing users that the protocol is unregulated and outlining key risks.
• Certification as a risk indicator – Exchanges can display certification status alongside protocol listings, helping users make informed choices without imposing a blanket ban.
• Liability exposure – Platforms will need robust compliance teams and possibly insurance coverage to manage the new liability risk, especially for high‑value or high‑TVL protocols.
• Stablecoin restrictions – The French bodies also suggest that EU‑authorized providers be barred from offering stablecoins that do not meet MiCA’s requirements, reinforcing a broader push for consumer protection.

Looking ahead

The French submission is a non‑binding proposal; any changes to MiCA must still be approved by EU lawmakers. If adopted, the framework could set a precedent for a balanced approach to DeFi regulation—one that preserves innovation while assigning clear responsibilities to the intermediaries that bridge users and decentralized protocols. Stakeholders should monitor the Commission’s response and prepare for potential adjustments to compliance processes, certification participation, and liability coverage.

--- This article was drafted with AI assistance and edited for clarity.