EBA Urges EU to Bring Crypto Lending Under MiCA Rules

The European Banking Authority (EBA) has urged the European Union to consider bringing crypto borrowing and lending under its Markets in Crypto-Assets (MiCA) framework, potentially adding new requirements for firms that connect users with decentralized-finance protocols.

The proposal forms part of the European Commission’s review of MiCA, the EU’s regulatory framework for crypto-asset services. The review also covers stablecoin rules, crypto-asset classifications and reporting requirements.

The EBA recommended a cost-benefit analysis of legislative changes that would add intermediary crypto borrowing and lending to the services regulated under MiCA. The review could also consider specific compliance obligations and additional oversight for firms involved in those activities.

For companies that give customers access to decentralized-finance lending protocols, the EBA outlined possible safeguards including user suitability tests, leverage limits and expanded disclosures. Suitability tests would assess whether a product is appropriate for a customer before access is provided.

The watchdog also considered restricting access to lending involving asset-referenced tokens and e-money tokens that require MiCA authorization. Another proposal would create a certification regime for decentralized-finance lending protocols.

Previous research cited by the EBA found crypto borrowing and lending activities in at least 16 European Union member states. The authority also said easier access to decentralized finance through crypto firms and artificial intelligence tools is making the boundary between centralized and decentralized finance less distinct.

The recommendations place lending alongside other crypto activities under consideration as EU regulators assess whether MiCA adequately covers newer financial services. The European Commission is reviewing whether MiCA adequately covers newer crypto-financial services.