The European Banking Authority (EBA) asked the European Commission to study safeguards under the Markets in Crypto-Assets Regulation (MiCA) for crypto-asset service providers (CASPs) that intermediate borrowing and lending or connect customers to decentralized finance (DeFi) lending.
The EBA is seeking a cost-benefit review before the Commission considers MiCA amendments. The request creates no immediate legal duties and does not seek to place every DeFi protocol under MiCA.
MiCA’s Recital 94 leaves crypto borrowing and lending outside the regulation’s scope and says applicable national law remains unaffected. Such services had been intermediated in at least 16 EU member states.
For CASPs that arrange loans, options under review include checking whether a product suits a customer, limiting leverage and giving borrowers more complete information. Firms providing access to DeFi could face stronger risk warnings. Another option would prohibit CASPs from facilitating borrowing or lending involving unauthorized asset-referenced tokens or e-money tokens, as those terms are defined under MiCA. Any protocol certification program would assess resilience to cyberattacks at minimum.
The European Securities and Markets Authority has separately proposed a tiered approach to crypto lending and borrowing, including disclosures and oversight requirements for providers that give clients access to DeFi protocols. French authorities have also called for intermediary due diligence and certification for protocols and smart contracts, as EconoTimes reported in its coverage of France’s DeFi safeguards proposal.
Wojciech Kaszycki, Strategy Advisor at BTCS S.A., said the effects could differ by customer group. In his view, secured lending for companies and affluent borrowers could remain in the EU, while providers might move yield products aimed at retail customers to other jurisdictions.
The Commission’s public consultation on its MiCA review closed Sept. 30. The review may include a legislative proposal if the Commission decides one is warranted.
