European Banking Authority urges expansion of MiCA to cover DeFi and crypto lending

The European Banking Authority (EBA) has recommended that the European Commission expand the Markets in Crypto-Assets (MiCA) regulation to include crypto-asset lending and decentralized finance (DeFi) activities. In a response submitted on September 24, the regulator urged a review of how crypto-asset service providers (CASPs) facilitate access to DeFi lending protocols through interfaces or products.

The EBA suggested several regulatory measures to mitigate consumer risks, including suitability tests, leverage caps, and mandatory disclosures. The authority also proposed a certification regime for DeFi lending protocols to assess their resilience against cyberattacks and recommended that users be warned that truly decentralized protocols lack regulatory safeguards.

Additionally, the EBA called for stricter rules regarding stablecoins, specifically targeting multi-issuer schemes from third countries and potentially prohibiting CASPs from facilitating transactions involving stablecoins that lack EU authorization. The regulator noted that the growing volume of intermediated crypto lending is blurring the lines between centralized and decentralized finance, creating risks of regulatory arbitrage.