The Cardano Foundation has objected to separate European Union regulation targeting decentralised finance (DeFi) and staking.

Cointelegraph, a blockchain outlet, reported on Oct. 21 that the foundation argued in a submission to the European Commission that existing financial laws should be applied based on the function and risks of activities, rather than the technology itself.

The foundation said regulators should distinguish between directly participating in decentralised networks and intermediary financial services that custody or control users' assets. It said even when the same technology is used, regulation should differ depending on the actual service structure. It added that regulation should follow the substance of the activity, the function performed and the risks that arise, rather than the technology.

It said staking should not be grouped broadly as a financial service. Cardano users can delegate ADA to strengthen network security, but do not need to hand over custody rights or lock up tokens in the process, it said. It argued that this type of participation should be treated differently from staking services run by intermediaries.

The submission also called for clearer boundaries between the Markets in Crypto-Assets (MiCA) framework and existing financial laws. The foundation warned that uncertainty for crypto operators could rise if interpretations differ by member state or regulations overlap. It said duplicate requirements and inconsistent interpretations could increase the burden of operating across Europe.

The European Securities and Markets Authority (ESMA) recommended in September adding additional safeguards for staking, lending and borrowing, and urged consideration of a new regulated services category for firms providing access to DeFi protocols. The Cardano Foundation reiterated that DeFi-related activities should also be assessed based on actual risk structures, not technology labels.

The foundation is also calling for regulatory clarity in the United States. On Oct. 20 it sent a letter to the U.S. Securities and Exchange Commission (SEC) together with five other blockchain groups, urging it to formally recognise digital commodities as non-securities in a draft crypto regulatory framework.

In future EU regulatory talks, how to distinguish network participation in which users retain control of assets from intermediary financial services is expected to be a key issue. It is expected to affect the obligations of DeFi and staking operators and how users participate, depending on how far such distinctions are reflected in final rules.