The European Banking Authority (EBA) has proposed that crypto lending be regulated under the European Union’s Markets in Crypto-Assets (MiCA) framework. This recommendation comes as the European Commission (EC) reviews potential changes to MiCA.
In its response to the EC's consultation, the EBA highlighted the necessity of regulating crypto borrowing and lending, particularly where crypto asset service providers facilitate access to decentralized finance (DeFi) lending protocols.
The EBA suggested that the EC conduct a cost-benefit analysis to evaluate the implications of adding intermediating crypto lending services to MiCA. This could lead to new compliance requirements and oversight for crypto firms involved in these activities.
Proposed measures include suitability tests for users, leverage limits, and enhanced disclosure requirements. The EBA also indicated the possibility of restricting access to lending involving asset-referenced or e-money tokens that require MiCA authorization.
As crypto lending continues to grow across the EU, the EBA's recommendations aim to address the increasingly blurred lines between centralized and decentralized finance, ensuring a robust regulatory framework for the evolving market.