EBA urges MiCA to cover crypto lending, including DeFi
The European Banking Authority urged the European Commission to bring crypto borrowing and lending, including DeFi access, under MiCA and to carry out a cost-benefit analysis.
In a response to the European Commission’s targeted consultation on the Markets in Crypto-Assets regulation, the European Banking Authority urged the Commission to bring crypto borrowing and lending within MiCA. The call covers cases where crypto asset service providers give clients access to decentralized finance lending protocols and requests a cost-benefit analysis of any legislative change.
The EBA recommended adding intermediation of crypto borrowing and lending to the list of services subject to MiCA. It proposed that the Commission assess new compliance obligations, enforcement needs and possible effects on market access before making changes.
The regulator proposed specific requirements for firms that enable client access to DeFi lending protocols. It outlined measures including user suitability checks, limits on leverage, stronger disclosure so clients understand risks, possible restrictions on lending that involves asset-referenced tokens or e-money tokens requiring MiCA authorisation, and exploring a certification regime for DeFi lending protocols.
The authority noted crypto lending activity is expanding across the European Union and cited earlier research showing borrowing and lending in at least 16 member states. It warned that easier access to DeFi through intermediaries and the increasing use of artificial intelligence tools are blurring the lines between centralized finance and decentralized finance and increasing the potential for consumer harm and systemic risk.
The recommendations form part of the EBA’s broader input to the Commission’s review of MiCA, which also covers stablecoin rules, the classification of crypto assets and reporting requirements for firms. The Commission will consider responses from EU authorities and market participants as it weighs possible updates to the MiCA framework.
The EBA’s submission would bring a wider set of crypto lending activities, including those routed through DeFi interfaces offered by regulated firms, within EU prudential and conduct rules.
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