CryptoSlate
The European Banking Authority is asking the European Commission to assess whether MiCA should impose new duties on crypto-asset service providers (CASPs) that intermediate DeFi borrowing and lending or connect customers to it through apps and products. In its September 24 response, the EBA called for a cost-benefit analysis; the Commission's consultation closes September 30 at 11:59 p.m. Central European Summer Time.
The EBA outlined possible changes, not enacted requirements. One would add intermediated crypto borrowing and lending to MiCA's list of CASP services. Another would set requirements for CASPs facilitating DeFi lending access, including through interfaces or products offering exposure. The Commission would weigh activity levels, retail participation and the seriousness of risks before deciding whether to pursue legislation.
Why it matters
The proposals focus on the access point between customers and on-chain lending. An app can connect a user to a protocol such as Aave, while the loan itself runs on-chain. Any future legislation would need to define which firms and activities count as facilitation, and how direct smart-contract use differs from company-provided access.
The EBA cited risks including unclear fees, yields or collateral changes, leverage that can amplify losses, hacks and outages, and the absence of creditworthiness checks. Potential safeguards include suitability tests, leverage caps, fuller disclosures, warnings about the lack of regulatory safeguards on truly decentralized protocols, and protocol security certification. It also raised restricting CASPs from facilitating lending involving certain asset-referenced or e-money tokens whose issuers lack required MiCA authorization.
Market impact
For DeFi users and service providers, the main near-term signal is regulatory uncertainty around app-based access, not an immediate change to lending rules. The Commission will use consultation feedback in its report on MiCA's application and crypto-market developments, and may propose legislation if warranted.
Frequently asked questions
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What MiCA changes is the EBA asking the Commission to assess?
The EBA proposed assessing whether to add intermediated crypto borrowing and lending to CASP services and set requirements for CASPs that facilitate DeFi lending access.
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Do the EBA's recommendations change DeFi lending rules now?
No. They are recommendations for analysis, not enacted rules. The Commission must assess the issue and decide whether to pursue legislation.
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When does the Commission's consultation close?
The consultation closes September 30 at 11:59 p.m. Central European Summer Time. Feedback will inform the Commission's report on MiCA and crypto-market developments.
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What consumer risks did the EBA identify?
The EBA cited unclear fees, yields and collateral changes, leverage, hacks and outages, and the lack of creditworthiness checks that could contribute to over-indebtedness.
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Could future requirements treat apps differently from direct smart-contract use?
Yes. The EBA's proposals focus on CASPs that intermediate loans or facilitate access through interfaces and products. Future lawmakers would still need to define the scope, including how direct smart-contract use is treated.
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