EBA Calls for Regulation of Cryptocurrency Lending in EU's MiCA Framework

The European Banking Authority (EBA) has called for cryptocurrency lending to be included in the EU's MiCA regulatory framework. In response to a targeted consultation by the European Commission on MiCA, the EBA stated that lending activities involving cryptocurrencies should be subject to regulation, including cases where cryptocurrency service providers offer decentralized finance (DeFi) lending protocols to users.

The EBA suggests that the European Commission conduct a cost-benefit analysis of legislative modifications and consider adding intermediated cryptocurrency lending to the MiCA regulatory services list, possibly with specific compliance requirements and supervisory activities. The institution also proposes setting requirements for companies offering DeFi lending protocols to clients.

Among the potential measures listed by the EBA are user suitability tests, leverage restrictions, and additional disclosure requirements. The regulator also suggests limiting access to borrowing involving asset-reference tokens or electronic currency tokens that require MiCA authorization and introducing a certification system for DeFi lending protocols.

The EBA notes that cryptocurrency lending is growing across the EU, with at least 16 member states having lending activities, and that increased accessibility through companies and AI tools is blurring the lines between centralized and decentralized finance.