Skip to content
- Aave urged the FCA to separate DeFi infrastructure from financial intermediaries rules.
- Aave said rule-based DeFi protocols do not control or arrange user transactions directly.
- Final FCA guidance could affect DeFi operations and the UK’s digital asset position.
Aave Labs has urged the UK Financial Conduct Authority to separate DeFi infrastructure from traditional financial intermediaries. The request came in its response to the FCA’s crypto-asset perimeter consultation. The firm warned that unclear guidance could hurt UK competitiveness globally.
The response focuses on how the FCA should treat permissionless on-chain systems. Aave said non-discretionary protocols operate through fixed rules and do not control user decisions. It argued that such systems should not sit inside the perimeter as firms that arrange or manage financial activity.
Aave Says DeFi Rules Could Shape UK Market Role
Linda Jeng, Chief Legal and Policy Officer at Aave Labs, outlined the position on X on Saturday. She said Aave has direct experience with UK regulation through Push Labs Limited and Push Virtual Assets Limited. Both entities are regulated in the UK by the FCA.
Jeng said on-chain financial systems are developing across several major markets. She named the United States, the European Union, Asia, and the Middle East as active regions. She said the UK must decide whether its framework will help shape that market or restrict access to it.
The Aave submission presented three main points to the regulator. The first point was for the FCA to designate DeFi protocols as non-discretionary infrastructure. Open and rule-based systems perform transactions in the same manner for all.
According to the company, these protocols don’t act as a financial intermediary. It also said that users’ activity should not be mediated by the developer. Jeng said developers are software developers, not entities who have discretion over transactions.
Also Read: Ethereum Sets Q3 2026 Timeline for Glamsterdam Hard Fork
The second point challenged the FCA’s use of the “added value” concept. Aave said that the concept is not contained in the appropriate legislation. It referred to the Regulated Activities Order, which states that simply facilitating parties to communicate is not arranging.
Aave Seeks Targeted FCA Changes for DeFi Rules
The third point was that it would not involve altering primary law. Aave suggested specific changes to the FCA guidance. Those changes may enable it to keep true intermediaries within the perimeter of the regulation and leave out non-discretionary infrastructure, it said.
Aave explained that this would align with current UK regulations and the intent of the policy. It referred to the Regulated Activities Order, Money Laundering Regulations and HM Treasury’s original intent. The company said that such a system would safeguard the perimeter without misclassifying software systems.
Founder and CEO Stani Kulechov also spoke on the consultation. He said the team submitted its response to help protect DeFi. He added that the goal was to support the UK’s ability to embrace decentralized finance.
The consultation coincides with the UK’s crypto framework being reshaped following the Financial Services and Markets Act. Market participants are watching how the FCA defines regulated activity. The final guidance could influence DeFi operations and the UK’s digital asset position.
Also Read: Polymarket Users in South Korea Face First Illegal Gambling Investigation by Police
