EBA Proposes Expanding MiCA to Cover DeFi Lending & Crypto Borrowing
The European Banking Authority wants the European Commission to consider bringing crypto lending and borrowing into MiCA, including cases where a licensed crypto company gives customers access to decentralized lending protocols.
- Crypto lending or borrowing providers were identified in 16 EU member states in an earlier EBA-ESMA assessment.
- The EBA wants policymakers to consider suitability checks, leverage limits and stronger risk disclosures.
- A potential certification regime could affect which DeFi lending protocols licensed crypto firms can offer to customers.
Nothing changes immediately. The recommendations form part of the EBA’s September 24 response to the European Commission’s targeted MiCA review and would require further EU policymaking before becoming binding rules.
But they expose a problem that has become harder to separate from MiCA: the regulation governs the crypto intermediary, while that same intermediary can give customers access to financial services sitting outside its harmonized framework.
Crypto Lending Sits Just Outside MiCA
MiCA established common European rules for crypto issuers and crypto-asset service providers, or CASPs. Lending and borrowing, however, are not among the crypto services harmonized under the regulation.
The EBA now wants the Commission to reconsider that exclusion.
One option would add intermediated crypto lending and borrowing to MiCA’s regulated services. Another would establish requirements for CASPs that facilitate customer access to decentralized lending protocols.
The second option reaches further than conventional crypto lending.
A licensed exchange could face additional responsibilities when it places a DeFi lending product inside its interface, even though the underlying loans, collateral and liquidations are handled by smart contracts the exchange does not control.
The regulatory focus therefore shifts from ownership of the protocol to control over its distribution.
One Protocol, Two Routes Into DeFi
That distinction becomes clearer when the same lending protocol is reached in two different ways.
A user can interact with DeFi directly through a self-hosted wallet. Another user could reach the same protocol through a MiCA-authorized exchange that packages access inside its own application.
The smart contracts may be identical, but the EBA is considering whether the second route should carry additional protections.
Potential safeguards include:
- Suitability assessments before customers enter certain crypto lending arrangements.
- Limits on lending or leverage where regulators see excessive risk.
- Additional disclosures and risk warnings before funds are committed.
- Protocol certification, potentially including cybersecurity criteria.
- Restrictions involving certain stablecoins that do not satisfy applicable MiCA requirements.
Certification is particularly important because it offers regulators a way to influence DeFi without trying to license every decentralized protocol directly.
A protocol that satisfies specified standards could potentially be distributed through regulated European platforms. Another could remain freely accessible onchain but unavailable through those intermediaries.
That would create a regulated distribution layer on top of an otherwise permissionless market.
For large lending protocols, certification could become commercially valuable because CASPs provide access to customers who might never interact directly with a smart contract. For smaller protocols, the compliance cost of reaching that distribution channel could become a new barrier.
And for CASPs, a seemingly simple “Earn” or “Borrow” button could acquire considerably more regulatory weight.
DeFi Access Is Becoming Easier to Hide Behind an App
That issue mattered less when DeFi required users to understand wallets, gas fees, blockchain networks, bridges and collateral mechanics.
Much of that complexity can now disappear behind a conventional interface.
A customer may select a lending product inside an app while collateral management, borrowing and liquidation occur through decentralized infrastructure in the background. AI-assisted tools and increasingly automated interfaces can reduce the technical knowledge required even further.
The customer experience therefore becomes more centralized while the financial infrastructure underneath remains decentralized.
READ MORE: ECB Pushes Broader MiCA Overhaul as Crypto Risks Move Into Banking
That complicates one of DeFi regulation’s oldest distinctions.
The relevant question is no longer simply whether a protocol is sufficiently decentralized to sit outside conventional financial regulation. Regulators also have to consider whether a regulated company has packaged, promoted or facilitated access to it.
For MiCA, the interface itself could become part of the regulated product.
Europe Already Has a €1.8 Billion DeFi Lending Market
The issue is not theoretical.
The EBA and European Securities and Markets Authority examined crypto lending, borrowing and staking in a joint report published in January 2025.
Their analysis identified crypto lending or borrowing providers in at least 16 EU member states. It also estimated approximately €1.8 billion in EU DeFi lending and borrowing, alongside roughly €3.6 billion in DeFi staking.
The authorities did not identify an immediate financial-stability threat based on the market at the time. But they highlighted several vulnerabilities, including excessive leverage, inadequate disclosures, money-laundering exposure and risks associated with rehypothecation and collateral chains.
That last mechanism matters particularly in lending.
Crypto collateral can potentially be reused across multiple transactions or protocols, increasing interconnectedness without necessarily giving the end user a clear view of where the risk ultimately sits.
The EBA now says lending activity has continued to develop across both intermediated and decentralized markets.
That makes MiCA’s exclusion increasingly consequential: the EU already regulates many of the companies through which customers encounter crypto, but not necessarily the credit products those companies can help them reach.
Stablecoin Lending Tests MiCA’s Interest Rules
Crypto lending also collides with a separate part of MiCA: its treatment of stablecoin interest.
MiCA restricts issuers and crypto-asset service providers from granting interest linked to asset-referenced tokens and e-money tokens.
A lending protocol can create yield through a different mechanism.
Rather than receiving interest from the stablecoin issuer, a holder supplies tokens to a lending market and earns a return generated by borrowers. The legal structure differs even though the customer still holds a yield-producing stablecoin position.
The EBA sees room for regulatory arbitrage around that distinction.
It therefore wants the Commission to consider restrictions where CASPs offer lending or borrowing involving stablecoins that do not satisfy applicable MiCA requirements, including cases involving tokens that qualify as e-money tokens but lack the necessary EU authorization.
That could make lending part of MiCA’s stablecoin enforcement architecture rather than a separate policy problem.
The Next MiCA Boundary May Be Distribution
The EBA is not proposing a blanket European ban on decentralized lending, and its recommendations do not yet impose new requirements on CASPs or protocols.
What it is proposing could be more structurally important.
Europe may end up separating permissionless access to DeFi from regulated distribution of DeFi.
That distinction would give protocols a new reason to meet regulatory and cybersecurity standards even when their smart contracts remain open to everyone. Certification could become a route into regulated distribution rather than a licence required for the protocol to exist.
It would also give CASPs a new product decision to make.
Offering DeFi access could expand the services available to customers, but doing so may eventually bring suitability checks, disclosures, protocol-selection responsibilities and stablecoin restrictions with it.
The commercial question is therefore no longer simply how much crypto lending moves onchain.
It is how much of that activity eventually travels through regulated interfaces.
If CASPs become an important distribution channel for DeFi credit, certification could shape which protocols capture mainstream European users without changing who can access their smart contracts directly.
MiCA’s first regulatory perimeter was built around crypto companies.
Its next one may be built around what those companies are willing, and permitted, to put in front of their customers.
The information presented in this article is intended for informational purposes only and should not be interpreted as financial, investment, or trading advice. Coinspress.com does not promote or advocate for any particular investment strategy, asset, or cryptocurrency project. Cryptocurrency markets are highly volatile and unpredictable – always perform your own research and seek guidance from a qualified financial professional before making any investment decisions.
Alexander Stefanov
Reporter at CoinsPress
Alex is Editor-in-Chief of Coinspress and co-founder of Millennial Media Group, with nearly a decade of experience covering financial markets - crypto first, then everything else. It started in 2016 with Bitcoin. Like most people at the time, he didn't fully understand it - so he kept digging. Blockchain, tokenomics, the projects, the cycles. That curiosity never stopped, and eventually pulled him into traditional markets too: equities, commodities, macro. Not because he left crypto behind, but because you can't properly understand one without the other. What drives him is straightforward: he wants to know why something is happening, not just that it's happening. Most market coverage stops at the headline - price up, price down, here's a chart. Alex finds that kind of reporting actively unhelpful. If you walk away from an article without understanding the mechanism behind the move, what did you actually learn? He holds a degree in Tourism from New Bulgarian University - not the most obvious path into financial markets, but markets have a way of pulling in people who are simply too curious to stay out. He has authored over 200 in-depth analyses and more than 10,000 articles across crypto and traditional finance. He still thinks every day in markets teaches him something new. That's probably why he hasn't stopped.
