European Parliament study suggests treating crypto as securities.

A study commissioned by lawmakers at the European Parliament, published on Tuesday, recommends that crypto assets should be treated as securities by default, and that legal status should be granted to autonomous organizations governing decentralized finance (DeFi).

The report comes as the European Union finalizes its Markets in Crypto Assets (MiCA) regulation, and considers whether a sequel will be needed to cover extra areas like DeFi, staking, and non-fungible tokens (NFTs).

The report suggests that all crypto assets should be considered transferable securities, which would mean that they would fall under the EU’s rigorous governance and authorization rules that apply to traditional stocks and bonds, unless a national regulator says otherwise.

The default rule “shifts the onus of gathering the technical facts and arguing the scope of regulation” from regulators to the industry, according to the report, which was drafted by a panel of academics from universities in Luxembourg, Sydney, and Hong Kong, on request from the Economic and Monetary Affairs Committee of the European Parliament.

The findings of the report are not a formal position of the European Parliament, but the document expressed skepticism about the effectiveness of MiCA in the short term, given the difficulties of enforcing its rules in an opaque cross-border context. The report also notes that the crypto industry has been struggling with a lack of clarity on whether rules designed for traditional financial securities apply to digital assets.

With MiCA signed into law on Wednesday, EU agencies responsible for banking and securities markets must now set out the detailed rulemaking to put it into effect. Even before then, the European Systemic Risk Board, an EU panel responsible for monitoring financial stability risks, has called for further laws to fill in what MiCA leaves out. Meanwhile, U.K. experts have also been studying the legal status of decentralized autonomous organizations (DAOs), a potential precursor to regulation of a sector which the report says is a “Wild West” of “fraudsters and thieves.”

Read more: EU Formally Signs New Crypto Licensing, Money Laundering Rules Into Law

Edited by Sandali Handagama.