# EBA Recommends EU Consider Rules for Crypto Lending Involving DeFi Protocols

By Riza Dagoc

Canonical URL: https://www.tokenpost.com/news/regulation/24225
Published: 2026-09-25T17:06:58.000Z
Updated: 2026-09-25T17:06:58.000Z
Section: Regulation

> The recommendation comes as Morpho and Aave founder Stani Kulechov dispute whether curator-managed vaults can qualify as noncustodial.

The European Banking Authority recommended that the European Commission consider regulating crypto-asset lending, including activity involving decentralized-finance protocols and services that provide access to them, as the European Union reviews its crypto rules.

The recommendation appeared in the EBA’s Sept. 24 response to the Commission’s targeted consultation on reviewing the Markets in Crypto-Assets Regulation, or MiCA. The supporting document points to crypto borrowing and lending activity in at least 16 EU member states.

The EBA cited potential regulatory-arbitrage concerns because stablecoin lending can create yield opportunities while MiCA prohibits issuers and crypto-asset service providers from offering interest on certain tokens. It also identified risks involving misleading disclosures, excessive leverage, contagion, hacks and fraud.

Possible safeguards include leverage limits, disclosure requirements and cyber-resilience measures. The recommendation does not establish those measures as adopted EU rules.

The regulatory debate coincides with a dispute over how decentralized vaults should be treated. Morpho founder Paul Frambot proposed separating on-chain vaults into “noncustodial” and “discretionary” categories.

Under Frambot’s framework, noncustodial vaults would operate through programmatic rules, timelocks, role-based permissions and exit mechanisms. Discretionary vaults would give managers greater control over asset allocation and strategy.

“If users can opt out within a reasonable timeframe without relying on the curator, then the vault is noncustodial,” Frambot said.

Aave founder Stani Kulechov criticized that approach, arguing that a curator who can allocate capital across markets or expand beyond a user’s initial mandate should prevent a vault from being considered noncustodial solely because it uses a timelock.

“Vaults that could reasonably be considered non-custodial are those without a manager,” Kulechov said.

A vault pools or routes deposited assets into lending or other yield-generating strategies. The dispute centers on whether fixed smart-contract rules and user exit rights are sufficient safeguards, or whether continuing managerial discretion determines a vault’s regulatory character.

A statement by SEC Commissioner Hester Peirce also focuses on the details of each arrangement. Peirce said managers who select strategies, reallocate assets or set lending parameters may need to assess whether their activities implicate federal securities laws.

“Whether a particular vault or lending strategy’s structure and activities are within the scope of the federal securities laws will come down to the specific facts and circumstances,” Peirce said.

MiCA began applying on Dec. 30, 2024, while provisions covering asset-referenced tokens and e-money tokens took effect June 30, 2024. The EBA’s latest document remains a recommendation for the European Commission’s review process, not a final EU lending rule.