EU deadline Sept. 30 for DeFi lending rules

The European Banking Authority asked the European Commission on Sept. 24 to carry out a cost‑benefit analysis of possible MiCA rules for crypto firms that connect customers to decentralized finance lending. The Commission’s targeted consultation closes Sept. 30 at 11:59 p.m. Central European Summer Time.

The EBA mapped where crypto‑asset service providers could sit in the DeFi lending chain and recommended the Commission assess whether firms that intermediate access or provide user interfaces to lending protocols should face specific obligations under MiCA. The regulator did not introduce new legal rules; it requested the Commission weigh the scale of intermediated activity, retail participation and the seriousness of consumer risks before proposing any legislation.

The EBA set out two main options for the Commission to examine. One would add intermediated crypto borrowing and lending to the list of services for which crypto‑asset service providers must register under MiCA. The other would impose requirements on firms that facilitate access to DeFi lending protocols, whether through an app interface or a product that gives exposure to a lending protocol. The treatment of direct interaction with smart contracts was left open.

Regulatory measures proposed for analysis include suitability or appropriateness checks for retail customers, caps on leverage, and clearer disclosures about fees, yields and collateral rules. The EBA recommended stronger warnings when activity involves protocols that lack traditional regulatory protections and suggested considering certification of lending protocols for cyber resilience. It also proposed barring crypto firms from intermediating loans that involve tokens meeting MiCA’s definitions of asset‑referenced or e‑money tokens if the issuer has not obtained required authorization.

The EBA listed consumer harms it associated with DeFi lending: incomplete information on charges and returns, sudden changes to collateral requirements, leverage that can multiply losses, commingling of assets, operational outages, hacks, weak recordkeeping, lack of creditworthiness checks and the risk of over‑indebtedness. The regulator framed these risks as the basis for a targeted review rather than immediate rule changes.

The response described how customers reach DeFi lending protocols via different routes. Wallets and apps may include in‑app steps to deposit tokens into pools, while users can access protocols through a native interface, other applications or by interacting directly with smart contracts. The EBA said any future legislation would need clear definitions of those routes so firms and customers know which checks and disclosures apply at each entry point.

Depending on how lawmakers define the activity, the review could draw a compliance boundary between apps that act as intermediaries and protocols that execute loans on‑chain. A wallet or app that brings a user to a protocol might face suitability assessments or warning requirements even if the loan itself is carried out by a smart contract.

Responses to the consultation will feed into a Commission report on how MiCA is applying and on broader crypto‑market developments. The Commission has said it may follow the report with a legislative proposal if warranted. Until the Commission decides, the EBA’s suggestions remain proposals and do not change current legal obligations.