France Pushes to Hold Crypto Exchanges Liable for DeFi Customer Losses

French regulators are calling for cryptocurrency exchanges to bear legal responsibility when customers suffer losses while accessing decentralized finance (DeFi) protocols through their platforms. In a joint proposal published Wednesday, France's Treasury, the Financial Markets Authority (AMF), the central bank, and the Prudential Supervision and Resolution Authority (ACPR) urged the European Commission to amend the Markets in Crypto-Assets Regulation (MiCA) to close gaps around DeFi intermediation.

Under the proposal, crypto-asset service providers (CASPs) would be required to vet DeFi protocols before offering access to customers, monitor them for vulnerabilities, and flag suspicious activity. Platforms would also be expected to pursue certification of protocols and smart contracts. "CASPs should be liable for certain incidents affecting clients where they actively facilitated access," the French authorities wrote. Platforms could still connect users to uncertified protocols, but only after conducting their own due diligence and providing enhanced risk disclosures. Smaller providers would face scaled obligations, while significant CASPs would be subject to the full set of requirements.

The French proposal is part of a broader push to overhaul MiCA, which currently excludes crypto services provided in a fully decentralized manner without intermediaries. France also backed transferring supervision of significant CASPs from national regulators to the European Securities and Markets Authority (ESMA) and lowering the current threshold of 15 million average daily active EU users used to identify them. On self-custodial wallets, authorities opposed blanket certification mandates for developers but supported voluntary certification for advanced wallets integrating DeFi services.

The European Commission is reviewing whether MiCA needs updating as crypto markets mature. Its consultation, which drew the French response, sought input on activities outside the law's original scope, including DeFi. Findings will feed into a report to EU lawmakers due by June 30, 2027, which could include formal legislative proposals to amend MiCA. The outcome would shape how exchanges across the bloc manage DeFi-related risk and disclosures for years to come.