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The European Banking Authority has recommended that the EU expand MiCA to cover crypto-asset lending and borrowing, including cases where regulated service providers facilitate customer access to DeFi lending protocols, citing risks around leverage, collateral, and consumer protection.
The European Banking Authority (EBA) has called on the European Union to consider bringing crypto-asset lending activities within the scope of the Markets in Crypto-Assets Regulation (MiCA), including cases where regulated crypto-asset service providers give customers access to decentralized finance (DeFi) lending protocols.
The recommendation was included in the EBA’s response to the European Commission’s targeted consultation on the review of MiCA, published on Sept. 24. The authority said the regulatory framework should evolve alongside new crypto-asset products, services and business models emerging across the market.
The EBA has asked the European Commission to carry out a detailed cost-benefit assessment of possible legislative changes that would expand MiCA to cover crypto-asset borrowing and lending.
One option identified by the authority is to add the intermediation of crypto lending and borrowing to the list of regulated crypto-asset services covered by MiCA.
The EBA also recommended considering additional obligations for crypto-asset service providers that facilitate customer access to DeFi lending protocols, including through interfaces or products that provide exposure to decentralized lending platforms.
The EBA pointed to several risks that could affect users of crypto lending services.
These include limited disclosure of fees, interest rates and yields, as well as changes to collateral requirements and uncertainty surrounding the rights and obligations of participants.
The authority also highlighted risks linked to excessive leverage, interconnected collateral chains and insufficient creditworthiness assessments. Other concerns include the commingling of crypto-assets and potential losses resulting from fraud, scams, operational disruptions, hacks and inadequate record-keeping.
The recommendation extends beyond centralized or conventional crypto lending businesses.
The EBA specifically wants the MiCA review to consider situations in which regulated crypto-asset service providers enable customers to interact with decentralized lending protocols.
Under the approach being considered, such providers could face additional disclosure requirements designed to make customers more aware of the risks involved in DeFi lending.
The EBA also emphasized that genuinely decentralized protocols do not operate under the same regulatory framework as regulated financial services and therefore may not offer equivalent safeguards to users.
The latest recommendation builds on earlier work by the EBA and the European Securities and Markets Authority (ESMA).
In a joint report published in January 2025, the two authorities examined developments in DeFi as well as crypto lending, borrowing and staking. They identified risks including excessive leverage, information gaps, money-laundering and terrorist-financing exposure, along with interconnected risks created by collateral chains and rehypothecation.
At the time, however, the regulators said they had not identified current financial-stability risks arising from crypto lending, borrowing and staking based on the available evidence.
MiCA began applying on Dec. 30, 2024, while provisions covering asset-referenced tokens and e-money tokens started applying on June 30, 2024.
The EBA’s latest response forms part of the European Commission’s broader review of the regulation and reflects the authority’s view that the framework may need to address activities that have developed around crypto lending and DeFi since MiCA was introduced.
The EBA said it remains ready to support the European Commission with any cost-benefit analysis needed before potential legislative changes are considered.
The EBA’s recommendation indicates that the next phase of MiCA could focus not only on the activities already covered by the framework, but also on business models that sit between regulated intermediaries and decentralized protocols.
Bringing crypto lending within MiCA would potentially create clearer obligations around disclosures, risk management and customer protection, but it could also raise difficult questions about how far regulation should extend when decentralized protocols operate without a traditional issuer or intermediary. The outcome of the Commission’s review will therefore be important in determining whether the EU treats access to DeFi lending as a regulated service in its own right or continues to distinguish between centralized providers and genuinely decentralized protocols.
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