EBA Calls for Crypto Lending Regulations Under MiCA

The European Banking Authority (EBA) has called for crypto-asset lending to be considered within the EU's Markets in Crypto-Assets Regulation (MiCA). This includes activities where crypto-asset service providers facilitate access to decentralized finance lending protocols. The EBA made this recommendation in its response to the European Commission's targeted consultation on the review of MiCA.

The authority emphasized that the emergence of new crypto-asset products and business models has created regulatory gaps that need to be addressed. The EBA specifically identified the possibility of adding intermediation of borrowing and lending to the list of crypto-asset services covered by MiCA. It also recommended considering requirements for crypto-asset service providers facilitating client access to decentralized lending protocols.

The EBA cited several risks associated with crypto lending, including insufficient information about fees, interest rates, or yields, changes to collateral requirements, and the rights and liabilities of users. The authority also pointed out risks associated with leverage, collateral chains, inadequate creditworthiness assessments, commingling of crypto-assets, and potential losses resulting from fraud, scams, operational failures, and hacks.

The recommendation extends beyond conventional crypto lending platforms to situations where regulated crypto-asset service providers provide customers with access to DeFi lending protocols. Under the framework proposed for consideration, providers facilitating such access could face additional disclosure obligations warning users about the risks associated with DeFi lending.