Understanding the Mamo Example (DeFi Agent Earning Yield)

Decentralized finance often promises “your money works for you” through automated agents. Mamo is one such DeFi AI agent on Coinbase’s Base blockchain. It lets users deposit crypto (e.g. USDC stablecoin or cbBTC, a Bitcoin token) and automatically invests those funds into lending protocols to earn passive income. The idea is that while you focus on life, Mamo quietly compounds your assets by collecting interest and rewards on your deposits. For example, a user’s USDC is allocated across Moonwell and Morpho – lending platforms on Base – where borrowers pay interest that becomes the user’s earnings. Additional reward tokens (like Moonwell’s WELL or Morpho’s MORPHO) are also accrued, but Mamo simplifies things: it auto-converts all rewards back into the original asset (USDC or cbBTC) and reinvests them, steadily growing the user’s balance in the background. This creates a “hands-off” compounding experience – no manual swapping or complex strategies needed, as the agent (Mamo) handles it all.

Mamo automatically moves a user’s deposited Bitcoin (via cbBTC) between different Moonwell lending pools to maximize yield. Borrowers’ interest payments (plus any WELL/MORPHO reward tokens) are continuously converted back into Bitcoin and reinvested. In short, “your money flows where it earns the most” with Mamo’s autonomous strategy, so the user enjoys quiet compounding without constant management.

This kind of AI-driven DeFi agent is innovative and convenient. However, crypto builders behind such projects must be mindful: even automated, “smart” investment services can fall under financial regulation. In the European Union, the new Markets in Crypto-Assets (MiCA) regulation may squarely apply to platforms like Mamo, meaning compliance obligations and legal consequences if ignored. Let’s break down why MiCA could cover these yield-generating crypto projects, and what that means for developers and founders.

What Is MiCA and Who Does It Cover?

MiCA (Markets in Crypto-Assets Regulation) is the EU’s comprehensive framework for crypto-assets that came into force in 2024. It introduces uniform rules across EU member states for both crypto-asset issuers and service providers. Crucially, MiCA requires any Crypto-Asset Service Provider (CASP) operating in the EU (or serving EU customers) to be authorized by an EU regulator[1][2]. Once licensed in one member state, a CASP can passport its services throughout the EU single market. In other words, if you’re running a crypto platform and have users or activities in Europe, MiCA likely expects you to obtain a CASP license (unless an exemption applies).

Importantly, MiCA’s scope isn’t limited to EU-based companies. It “applies to any CASP serving European interests, regardless of where the provider is located.”[2] In practice, this means even a DeFi app built elsewhere must comply if it has EU customers (more on how regulators determine that later). MiCA defines several categories of regulated crypto-asset services, if your project performs any of these, you’re a CASP and need authorization[3]:

·      Custody or administration of crypto-assets on behalf of clients (holding users’ coins or private keys).

·      Operating a trading platform for crypto-assets (running an exchange or marketplace).

·      Exchanging or trading crypto-assets on behalf of others (executing orders, investing users’ funds, or managing portfolios for them).

·      Providing crypto-asset portfolio advice or management for others (guiding investment decisions, automated or not).

·      Facilitating the transfer of crypto-assets or payments (crypto payment services).

Services like Mamo clearly fall into these definitions. Mamo takes user deposits and invests crypto on their behalf to generate yield – this is essentially “investing or trading crypto-assets on behalf of others,” a regulated service under MiCA[3]. Mamo also likely provides a form of portfolio management/advice, since its algorithm decides where to allocate assets for the best return. Even if the process is automated and presented as “AI doing the work,” EU regulators will view the team or entity behind the platform as providing a financial service to users. In short, if you build a yield-generating agent or any DeFi platform that handles user assets in these ways, MiCA probably considers you a CASP who must play by its rules.

DeFi and the “Fully Decentralized” Exclusion under MiCA

One common question is: “What if my project is decentralized? Does MiCA still apply?” MiCA does carve out an important exclusion for truly decentralized setups. Recital 22 of MiCA states that “where crypto-asset services are provided in a fully decentralised manner, without intermediaries, they should not be covered” by the regulation[4]. In plain terms, if your protocol has no identifiable operator or middleman – just self-executing code on a blockchain – then MiCA’s requirements might not apply. This reflects a policy choice: the EU knows it’s tricky to regulate a pure smart contract with no company or person in control. So, MiCA’s rules effectively cover only centralized or semi-centralized models, and not a scenario where “services are provided not by an identifiable operator but by code stored on a blockchain”[5][6].

However, and this is a big however, most DeFi projects are not fully decentralized in practice. The threshold for falling outside MiCA is extremely high. “Fully decentralised, without intermediaries” means no legal entity actively involved in operating or controlling the service[7]. In reality, many so-called DeFi platforms have some central components: a core development team, admin keys, a foundation, a front-end website, or governance processes that can influence the system. MiCA itself acknowledges that if “part of such activities or services are carried out in a decentralised manner” but other parts involve an intermediary, the regulation still applies[8]. Any hint of “partial decentralisation” (a hybrid model) voids the exemption, the project would remain subject to MiCA obligations[8].

For example, a decentralized exchange (DEX) might have open-source smart contracts, but if there is an upgradeable contract that the team can alter or a multisig that can pause the protocol, that is an intermediary influence. As one legal analysis notes, a DEX with an admin “upgrade key” is not fully decentralized – “there is an entity that retains the ability to interfere with its functioning.”[9] In such cases, regulators can identify a “controlling entity” (the team or DAO behind the project) and require it to obtain a CASP license to operate[9].

The bottom line: Full decentralization is the only sure way to be outside MiCA’s scope, and it’s a very high bar[10]. Any element of centralization – any entity exerting control or providing the service – likely brings the project under MiCA[10]. The EU hasn’t given a precise test for “decentralized enough,” so it will be judged case by case by national regulators[11][12]. In practice, if your DeFi app has someone behind it that can be identified or has special powers, assume MiCA applies. In the context of Mamo: even though it brands itself as an AI-driven agent and claims “Mamo guides your money, but never takes custody” (implying a non-custodial smart contract model)[13], there is clearly a team that built the system, issues a MAMO token, and presumably can upgrade or modify the strategy. That means Mamo is not a 100% decentralized free-for-all protocol – it has an operator in the loop, so MiCA’s rules would still view it as a service provider, not just neutral code.

Signs Your “DeFi” Project Is Actually a CASP

Crypto entrepreneurs should honestly assess how decentralized (or not) their project is. MiCA’s narrow decentralization carve-out won’t protect projects that retain admin control or fee mechanisms. Here are red flags that a platform like Mamo would be considered a CASP (needing a license) rather than a decentralized exempt protocol:

·      Admin Keys or Upgradeable Contracts: If the team can alter, upgrade, or halt the smart contracts (e.g. via a multisig or proxy contract), there is a clear intermediary influence.

·      Fee Collection or Revenue Control: If the protocol charges fees, directs a cut of yields to a treasury or to token holders, or otherwise controls income streams, a central entity is benefiting and managing those flows.

·      Governance Control: If the project’s rules or parameters (interest algorithms, reward handling, etc.) can be adjusted by an identifiable group (developers, a company, or even a “governance token” where a small group holds significant power), then an intermediary exists.

Any of these factors means the platform is not “fully automated without insiders.” In fact, EU authorities have explicitly warned that projects using multisig admins, charging fees, or centrally setting rules likely qualify as CASPs (i.e. entities subject to MiCA)[14]. As a builder, if you recognize these elements in your project, you should plan for MiCA compliance (or consider further decentralizing your architecture).

The Reverse Solicitation Exemption – No Easy Escape Hatch

One specific concept the crypto community has eyed in MiCA is “reverse solicitation.” This is a potential exemption for third-country (non-EU) firms: if an EU-based client approaches your platform entirely on their own initiative, you can serve them without getting a CASP license for that client under Article 61 of MiCA[15]. In essence, if you’re a crypto service provider outside the EU and you do not actively market or solicit users in Europe, an EU customer can theoretically use your service by their own accord (like stumbling upon your app) – then you wouldn’t be in breach for not being licensed. This concept is borrowed from traditional finance and aims to allow cross-border services when the customer, not the company, initiated the relationship.

However, it’s critical to understand how narrow and limited this reverse solicitation carve-out is. MiCA’s drafters and regulators explicitly forbid using it as a loophole to circumvent the rules[16]. Some key points about Article 61 reverse solicitation:

·      It only covers the specific service or product the client requested on their own – you can’t use one unsolicited request as a free pass to offer that client other products or services they didn’t ask for[17]. For example, if an EU user independently opens a Mamo USDC account, you can’t later offer them an unrelated crypto service unless it’s directly related and of the “same type” they originally requested[17]. (MiCA and ESMA clarify that “same type” means you can’t mix categories – e.g. a request about a utility token doesn’t imply interest in an e-money stablecoin, etc.[18][19].)

·      Follow-up offers must be closely related and timely. If you do provide additional services of the same type, they should occur not long after the client’s initial request[20]. The idea is to prevent a loophole where a firm waits a while then starts marketing new things under the guise of that old request – ESMA says any follow-up marketing should happen shortly after and be contextually tied to what the client originally wanted[20].

·      Absolutely no active solicitation in the EU. The exemption is void if there’s any marketing or promotional activity targeting EU customers on the part of the project[16]. This includes direct or indirect promotion – everything from obvious advertising to subtle tactics counts. ESMA has listed “red flag” solicitation activities that would disqualify a firm from claiming reverse solicitation[21][22]. Examples of red flags include: having a website or social media in EU local languages (other than broadly-used English)[23], SEO or ads targeting EU countries, running community chats or Telegram groups aimed at specific EU national audiences, hiring influencers popular in an EU country, sending marketing emails to EU users, or sponsoring EU events[24][25]. In short, if you’ve done anything to actively attract European users, you cannot later say “oh, they came to us unprompted.” The initiative must be exclusively the client’s.

For a project like Mamo, this means that unless the team completely avoids any EU-facing marketing (no translated sites, no EU region campaigns, no partnerships targeting EU, etc.), they cannot rely on reverse solicitation to avoid MiCA. If Mamo’s developers are based outside Europe, they might think they can ignore MiCA, but the moment they tweet about their service in an EU language or run an ad that reaches someone in, say, Germany or France, they’ve likely crossed into “soliciting” territory. The reverse solicitation route is a very narrow door, intended for one-off cases where the user truly acted on their own initiative[16]. It’s not a scalable strategy for a business looking to grow users in Europe. ESMA and national regulators will interpret this strictly (they’re already issuing guidance on it), so crypto firms should not bank on reverse solicitation as a long-term compliance plan.

Implications for Builders: Risks and Responsibilities under MiCA

For developers and founders of crypto projects like Mamo, the implications of MiCA are significant. Ignoring the regulation is not a viable option if you have any intention of accessing the EU market or even passively allowing Europeans to use your dApp. Builders should be aware of the consequences and compliance responsibilities that come with MiCA’s broad scope:

• Licensing Requirement: If your project falls under the CASP categories (as discussed, yield platforms, automated investment agents, etc. do), you’ll need to pursue authorization in an EU member state to operate legally. This means meeting fit and proper requirements, minimum capital (which ranges up to €150k depending on services)[26][27], implementing governance and security measures, and applying to the regulator. The upside is once authorized, you get an EU passport to serve all countries[1] – but the process is non-trivial and requires solid compliance efforts.

• Consumer Protection and Transparency: MiCA places a strong emphasis on clear communication, fair marketing, and disclosure of risks/fees to users[28]. Even beyond the licensing, running a compliant CASP means adjusting how you present your product. For instance, if Mamo were EU-licensed, it would need to be very upfront about any fees, the risks of smart contracts/yield (no promise of guaranteed returns), and ensure its communications are not misleading. These standards echo traditional finance rules – a far cry from the often informal, meme-heavy style of crypto marketing.

• No Token or Service Launch to EU Investors Without a Whitepaper: MiCA requires issuers of crypto-assets (like if your project has its own token) to publish a compliant white paper (similar to a prospectus) and notify regulators[29]. In Mamo’s case, the platform has a native token “MAMO” with revenue-sharing mechanics. If that token were offered to people in the EU (through an ICO, airdrop, or other sale), MiCA would require a detailed whitepaper with all relevant info (tech, rights, risks)

In summary, builders of DeFi AI agents and yield platforms must treat MiCA seriously. The regulation is broad in reach and narrowly interpreted when it comes to exemptions, meaning many projects that thought they were outside regulatory scope may find themselves squarely in it. A platform like Mamo, which actively manages user assets for profit, exemplifies the kind of service MiCA was designed to supervise for the sake of consumer protection and market integrity. Founders should proactively consult legal experts, evaluate their level of decentralization, and consider steps to either comply (seek licensing) or adjust their product offering to avoid prohibited activities in Europe.

Conclusion: Prepare for a Regulated Era

MiCA heralds a new era where crypto ventures operate under clearer rules – which brings both challenges and opportunities. For innovative DeFi projects, especially those leveraging AI and automation to deliver financial gains, it’s crucial to realize that regulators will treat substance over form. Calling an asset manager an “AI agent” doesn’t change its nature as a financial service, and the EU will regulate it accordingly. While true decentralization remains a way to stay outside the law’s scope, very few projects can achieve that purity. Most teams will need to either embrace regulation or constrain their user base to avoid running afoul of it.

Crypto developers and founders should view MiCA not just as a box-ticking compliance hassle, but as a framework that could legitimize and open doors (via the EU passport) to a large market if navigated correctly. That said, the cost of getting it wrong – whether through willful non-compliance or misguided reliance on narrow exemptions like reverse solicitation – is high. The advice is clear: be aware, get prepared, and don’t underestimate MiCA’s applicability to your “decentralized” project. The quiet compounding of user funds in the background, as Mamo does, is a great value proposition – but doing it within the bounds of law will ultimately protect both the users and the builders enabling that innovation.

In the end, DeFi builders should build not only with code, but with compliance. Staying informed on regulations like MiCA is now part of the job description for successful crypto entrepreneurship in 2025 and beyond. The sooner projects integrate that reality, the more likely they are to thrive in the long run under the watchful (but hopefully fair) eye of regulators.

Sources: Recent legal analyses and guidelines on MiCA’s scope and exemptions were referenced in compiling this overview. Key insights on MiCA’s treatment of DeFi and reverse solicitation were drawn from EU regulatory commentaries[4][15][21], with examples of narrow interpretations and enforcement expectations highlighted from expert publications[9][36][33]. These should serve as further reading for those looking to navigate the intersection of DeFi innovation and regulatory compliance.

[1] [26] [27] [28] [29] [30] [33] [34] MiCA: CASP Authorisation, Governance & Liability Explained

https://www.newbalkanslawoffice.com/mica-casps-authorisation-governance-liability/

[2] [3] What is the MiCA Crypto Regulation? 2025 Update | Narvi

https://narvi.com/blog/mica-eu-regulation

[4] [5] [6] [7] [8] [9] [10] [11] [12] [14]

https://lbplegal.com/en/6556-2/

[13] Bitcoin, meet Mamo! — Mamo

https://mirror.xyz/mamoagent.eth/Ym8J2ADWgZM5gmlk-u-5nmXrViw0LbsXYqh3-3ZlDqg?collectors=true

[15] [16] [17] [18] [19] [20] [21] [22]

https://lexters.com/reverse-solicitation-under-the-markets-in-crypto-assets-regulation-mica/