EU banking regulator calls for cryptocurrency lending rules in the framework of MiCA

The European Banking Authority (EBA), in its recent response to the EU Commission's targeted consultation on MiCA ( crypto asset Marketplace Regulation) has formally recommended that crypto lending be included within the scope of MiCA regulation, which includes crypto asset service providers providing users with access channels for DeFi (9 DeFi ) Lending Agreements.

Key issues of concern to regulators

In its opinion, the EBA noted that crypto-lending activity is growing steadily across the EU and previous studies have shown lending practices in at least 16 EU member states. The agency believes that a lower entry threshold of DeFi for crypto firms coupled with an increasingly widespread adoption of instruments such as artificial intelligence are blurring the boundaries between centralized finance and DeFi which constitutes regulatory loopholes.

The EBA advised the European Commission to undertake a cost-effectiveness analysis on whether or not crypto lending intermediation services should be included in MiCA's list of regulated services, which could lead to specific compliance requirements and regulatory actions.

Specific measures that may be introduced

The EBA lists several potential regulatory tools for crypto firms that provide users with access to the DeFi lending protocol:

• Appropriateness testing of users
• Set the leverage upper bound
• Increased disclosure obligations

In addition, the EBA has proposed two further options: restricted access to lending activities involving asset reference token or electronic money token , both requiring MiCA authorization; and introduction of a certification system for DeFi loan agreements.

Follow-up: Components of the MiCA review

This recommendation is part of EBA's submission to the European Commission MiCA Review. The scope of this review also includes Regulation stablecoin , Classification crypto asset and reporting requirements.

For the industry, platforms that currently offer crypto-lending services or interconnect DeFi lending agreements in the EU will face clear licensing and compliance obligations if the relevant recommendations are finally adopted; for ordinary users, measures such as adequacy testing and leverage restrictions may change their process of using lending products.