European Commission Prepares Pilot For Ethereum DeFi Surveillance


  • A public call for tender was launched by the EU Commission last week.
  • The call is for a study geared toward developing automated monitoring systems and compliance oversight for decentralized finance.
  • DeFi operations in the Ethereum ecosystem are the main target for the commission’s so-called “embedded supervision”.
  • The U.S. Securities and Exchange Commission also hinted that oversight for Ethereum may be required after the proof-of-stake upgrade in September.

Regulators from the European Commission could push toward developing monitoring infrastructure from decentralized finance (DeFi) activities on the Ethereum blockchain considering the last public call for a study. 

Patrick Hansen, Director for European Union strategy and policy at Circle, tweeted that the commission invited public participation for a study on “embedded supervision” sometime last week. 

Hansen’s tweet added that the EU commission is particularly interested in supervision for DeFi on Ethereum, the world’s second-largest blockchain which powers cryptocurrency’s leading altcoin – Ether (ETH).

Ether’s chain is also the largest chain in DeFi with a total value locked above $31 billion, per data from on-chain aggregator Defilama

The EU Commission’s study will center around monitoring real-time on-chain Defi operations by designing an automated data-gathering system to spreadhead possible regulatory efforts. According to details shared, the pilot program is worth around $242,000 and could run for at least six months. 

Hansen tweeted that progress with the pilot could bolster regulatory oversight and allow relevant agencies to seamlessly monitor compliance from companies. 

Ethereum Under Regulatory Spotlight

Leading DeFi and crypto markets is bound to have perks and cons. That much is true for Ethereum as the largest alternative blockchain network in the world, second only to the crypto OG Bitcoin (BTC).

The U.S. Securities and Exchange Commission also has eyes on the Ether chain, although not for automated DeFi monitoring purposes. Instead, the SEC hinted that Vitalik Buterin’s chain could be powering a security token since its recent switch to a proof-of-stake consensus mechanism. 

SEC chair Gary Gensler mentioned the possibility, noting that Ethereum’s nodes are now predominantly clustered in the U.S. and that the blockchain could fall under the purview of security laws.