European policymakers are facing a significant challenge as they strive to define ‘decentralization’ amidst the growing focus on decentralized finance (DeFi) within upcoming crypto regulations for 2026. MiCA, Europe’s first comprehensive regulatory framework for the crypto industry, entered into effect in December 2024 with aims of enhancing investor protection, combatting fraud, and managing stablecoin reserves. However, as MiCA reaches its final implementation phase, policymakers are turning their attention to DeFi, where a lack of clarity remains around regulations due to its inherent decentralization. Vyara Savova, senior policy lead at the European Crypto Initiative (EUCI), highlighted that these decentralized protocols fall into a regulatory gray area with limited guidance from existing frameworks.