EBA Asks EU to Review Rules for Crypto-DeFi Lending Intermediation

The European Banking Authority (EBA) has asked the European Commission to assess new rules for crypto firms that connect clients to decentralized finance (DeFi) loans under the Markets in Crypto-Assets (MiCA) regulation.

On September 24, the EBA proposed a cost-benefit analysis of duties applicable to loan intermediation and access to protocols via interfaces or products. The recommendation is aimed at companies that provide apps taking users to DeFi protocols, while allowing loans to run on-chain.

The proposal was motivated by consumer risks such as incomplete information about fees, yields, collateral requirements, leverage, operational failures, hacks, commingling of funds, inadequate records, and the absence of credit checks. The EBA listed two possible changes: including crypto lending and borrowing intermediation in the list of MiCA Controlled Activities and Services (CASP) services, or creating requirements for CASPs that facilitate access to DeFi protocols via interface or product.

The European Commission will consider the scale of these activities, retail participation, and the severity of the risks before deciding whether to move forward with legislation. The consultation closes on September 30 at 11:59 p.m. Central European Summer Time.