The European Union may be moving toward stricter oversight of crypto lending and access to decentralized finance as regulators look at expanding the scope of the Markets in Crypto-Assets Regulation, better known as MiCA.
The European Banking Authority has recommended that crypto borrowing and lending services should be considered for inclusion under MiCA. The proposal could also affect crypto companies that act as gateways between customers and decentralized lending protocols.
At the moment, borrowing and lending are not fully covered by MiCA’s existing service categories. The EBA believes that this regulatory gap deserves closer attention as DeFi lending becomes more widely used across Europe.
EBA Wants Crypto Lending Brought Under MiCA
The EBA has asked the European Commission to examine whether legislative changes are needed to regulate companies that facilitate crypto borrowing and lending.
Rather than focusing only on centralized lenders, the recommendations also look at companies that provide users with access to DeFi protocols.
If the rules are expanded, crypto service providers could potentially face new requirements such as customer suitability assessments, leverage limits and additional risk disclosures.
The EBA has also suggested that policymakers examine whether certain lending products involving regulated stablecoins should face additional restrictions.
However, these ideas are still recommendations. No new lending rules have been formally adopted.
DeFi Access Could Face Additional Checks
One of the key issues for regulators is the growing connection between centralized crypto platforms and decentralized finance.
Many users do not interact directly with DeFi protocols. Instead, they access decentralized lending services through exchanges, wallet providers or other crypto companies.
The EBA argues that these intermediaries may need clearer regulatory responsibilities.
Research referenced by the authority shows that crypto lending activity has already been identified in at least 16 EU member states.
Regulators are also concerned that the distinction between centralized and decentralized services is becoming increasingly difficult to define, especially as companies provide simplified interfaces to decentralized protocols.
A possible framework could require regulated crypto firms to carry out suitability checks before giving customers access to certain lending products.
Leverage restrictions could also be introduced to reduce excessive borrowing risk.
Another option being considered is a certification framework for DeFi lending protocols that are offered through regulated crypto service providers.
Stablecoin Lending Is Also Under Scrutiny
Stablecoins are becoming another important part of the EU’s crypto lending debate.
The EBA has suggested that regulators could consider restrictions on borrowing and lending products involving asset-referenced tokens and e-money tokens regulated under MiCA.
European central banks have also raised concerns about crypto platforms offering returns on stablecoins through lending, borrowing and staking products.
MiCA already restricts certain forms of remuneration linked to regulated stablecoins, but regulators are examining whether companies could structure products in ways that indirectly generate returns outside the current framework.
The European System of Central Banks has therefore called for greater clarity around these products.
At the same time, the EBA said that many of MiCA’s current requirements for stablecoin issuers remain appropriate.
According to the authority, 39 e-money tokens had been issued under MiCA as of September 1, while no asset-referenced tokens had yet received authorization.
MiCA Review Is Expanding Beyond Its Original Scope
MiCA became fully applicable across the European Union on December 30, 2024, while the rules for asset-referenced and e-money tokens began applying six months earlier.
The regulation created a common framework for crypto asset issuers and crypto service providers operating across the bloc.
However, several areas of the crypto industry were not comprehensively addressed in the original regulation.
These include lending, borrowing, staking, NFTs and some forms of decentralized finance.
The European Commission is now reviewing how MiCA is working in practice and whether additional areas of the crypto market should be brought under its scope.
The Commission’s consultation includes feedback from crypto businesses, financial institutions, technology companies, regulators, industry groups and other stakeholders.
The consultation remains open until September 30.
The feedback could eventually lead to proposed amendments to MiCA, although any changes would need to go through the EU legislative process before becoming law.
Regulators Are Also Examining What Counts as DeFi
Another challenge is determining whether a crypto platform is truly decentralized.
Some protocols operate through decentralized smart contracts but still rely heavily on development teams, governance groups, companies or user interfaces controlled by identifiable organizations.
Regulators are increasingly looking at these structures when deciding whether a project should qualify for exemptions designed for fully decentralized systems.
Malta’s financial regulator recently proposed a new framework for decentralized autonomous organizations and other DeFi entities.
The regulator noted that some projects describing themselves as decentralized may still have concentrated control among identifiable participants.
Similar questions are now being considered at the EU level.
If a centralized company operates the main interface that users rely on to access a decentralized lending protocol, regulators may consider whether that company should have additional responsibilities.
Crypto Lending Currently Sits Outside Parts of MiCA
The limitations of the existing framework can already be seen in how some crypto businesses operate across Europe.
Some companies use regulated partners for services such as custody and brokerage while offering lending or yield products separately.
For example, Nexo previously said that its custody and brokerage services for European Economic Area customers were provided through regulated German partners.
Its Earn products and crypto-backed loans, however, were offered separately and were not covered by the MiCA or MiFID authorizations of those partners.
An expansion of MiCA could potentially change this type of structure.
Crypto companies that intermediate lending or provide access to DeFi borrowing protocols could eventually be required to meet specific authorization, disclosure or consumer protection requirements.
Changes Would Still Require New Legislation
It is important to note that the EBA has not introduced new rules yet.
Its recommendations are part of the European Commission’s broader review of MiCA.
Any expansion of the regulation would require further analysis, a formal legislative proposal and approval through the EU legislative process.
The EBA has also called for clearer rules around crypto asset classification, arguing that uncertainty around MiCA’s scope can create delays and additional costs for businesses launching new products.
Reporting requirements for crypto issuers and service providers may also be reviewed to improve supervision and risk monitoring.
For now, MiCA remains unchanged.
However, the ongoing review shows that European regulators are paying increasing attention to crypto lending, DeFi access, stablecoin yield products and other areas that were not fully addressed when the original framework was created.
If lawmakers eventually decide to expand MiCA, crypto lending platforms and companies providing access to decentralized lending protocols could face significantly more regulatory oversight across the European Union.
