EU banking watchdog calls for crypto lending rules under MiCA

The European Banking Authority has recommended that crypto borrowing and lending be regulated under the EU’s Markets in Crypto-Assets (MiCA) framework, responding to the European Commission’s targeted consultation on MiCA reform. The EBA’s submission argues that intermediating crypto lending services — including those where crypto asset service providers facilitate user access to DeFi lending protocols — should be considered for inclusion among services subject to MiCA rules.

As part of its input, the EBA proposed that the Commission carry out a cost-benefit analysis of legislative changes that would place intermediating crypto borrowing and lending under MiCA. The authority set out a suite of potential compliance measures, such as suitability checks for users, limits on leverage, enhanced disclosure obligations and the possibility of restricting lending that uses asset-referenced or e-money tokens which would require MiCA authorization.

The EBA also flagged the growing use of DeFi and tools like artificial intelligence to broaden access to decentralized lending, saying this development blurs the lines between centralized and decentralized finance. To address risks specific to DeFi lending, the regulator suggested introducing a certification regime for protocols that offer lending services and recommended tailored requirements for firms that provide client access to those protocols.

These recommendations are part of the EBA’s wider contribution to the Commission’s MiCA review, which is also examining stablecoin rules, crypto-asset classification and reporting requirements. The authority noted that borrowing and lending activity is expanding across the bloc, citing previous research that found such activities in at least 16 member states.