EU faces September 30 deadline to decide future of DeFi loans

The European Banking Authority (EBA) has urged the European Commission to examine how the Markets in Crypto‑Assets (MiCA) framework should treat crypto‑asset service providers (CASPs) that give customers access to decentralized finance (DeFi) lending.

Key points of the EBA’s September 24 response

• Calls for a cost‑benefit analysis of possible duties on intermediated borrowing and lending.
• Identifies two potential regulatory changes: adding crypto borrowing and lending to the list of CASP services, and setting specific requirements for CASPs that facilitate DeFi access via interfaces or product offerings.
• Highlights consumer‑risk concerns such as incomplete fee information, leverage‑related loss amplification, and operational risks like hacks or outages.

Proposed safeguards and restrictions

The EBA suggests several safeguards for the Commission’s analysis, including suitability tests, leverage caps, enhanced disclosures, and warnings that fully decentralized protocols may lack regulatory protections. It also proposes certification of lending protocols for cyber‑resilience and a possible prohibition on CASPs intermediating loans involving asset‑referenced or e‑money tokens without an authorized issuer.

Impact on user access routes

Different access methods—direct smart‑contract interaction, app‑based interfaces, or product‑based exposure—could be treated differently under future rules. For example, an app that connects a user to DeFi loans might face entry‑point checks, while the underlying protocol continues operating on‑chain.

Consultation timeline

The Commission’s targeted consultation closes on September 30 at 23:59 CET. Feedback will shape the final report on MiCA’s application and may trigger a legislative proposal.