EU banking watchdog calls for crypto lending rules under MiCA

The European Banking Authority (EBA) has formally recommended that the European Commission integrate crypto borrowing and lending services into the existing Markets in Crypto-Assets (MiCA) regulatory framework. This proposal aims to address the growing prevalence of lending activities across at least 16 EU member states, which the EBA notes are increasingly facilitated by centralized crypto-asset service providers and AI-driven tools. The regulator suggests implementing strict oversight, including mandatory suitability tests for users, leverage limits, and enhanced disclosure requirements for firms. Furthermore, the EBA is exploring potential restrictions on lending involving MiCA-authorized asset-referenced or e-money tokens, alongside a possible certification regime for decentralized finance (DeFi) protocols. By blurring the lines between centralized and decentralized finance, these activities have prompted regulators to seek a more robust legislative approach to consumer protection and market stability. This move signals a significant shift toward formalizing the regulatory perimeter for DeFi-adjacent services within the European Union. If adopted, these changes would impose substantial compliance burdens on any entity providing access to crypto lending, fundamentally altering the operational landscape for RWA-backed lending platforms and DeFi protocols in the region.