Crypto loans could face new rules – European crypto regulation may expand again. The European Banking Authority (EBA) proposes that the rules also apply to the lending and borrowing of crypto-assets, which MiCA currently does not explicitly regulate. The regulator primarily highlights risks for retail investors, high leverage, and the increasing interconnectedness of crypto platforms with decentralized finance.
While the European Union has already introduced one of the most comprehensive regulatory frameworks for cryptocurrencies globally, some parts of the market still remain outside its direct reach. Crypto lending is one of them.
The European Banking Authority (EBA) therefore now recommends that the European Commission consider their inclusion in the Markets in Crypto-Assets regulation, known as MiCA. In its opinion published on September 24, the EBA explicitly stated that the regulation should also address situations where crypto-asset service providers enable clients to access decentralized lending protocols (DeFi).
This is not yet an adopted change to European law. The EBA’s opinion is part of an ongoing review of MiCA, and the regulator recommends that the European Commission assess what potential rules for the lending and borrowing of crypto-assets should look like.
Article Content – Crypto Lending:
MiCA does not yet directly regulate crypto lending
MiCA gradually entered into force during 2024 and established common rules for, for example, crypto exchanges, the custody of crypto-assets, or the issuance of certain types of stablecoins. However, the current framework does not explicitly cover the lending and borrowing of cryptocurrencies.
This stems directly from a joint analysis by the EBA and the European Securities and Markets Authority (ESMA). According to it, MiCA does not regulate the lending and borrowing of crypto-assets, including e-money tokens. Some specific services, however, may fall under existing national financial legislation of individual countries.
European legislation, in fact, anticipated this during MiCA’s creation. Article 142 requires the European Commission to assess, among other things, the need for and feasibility of regulating crypto-asset lending and borrowing, and the appropriate regulatory treatment of decentralized finance.
In practice, crypto lending can work, for instance, by an investor providing their cryptocurrencies to a platform or another user, receiving interest or other yield in return. Conversely, a user can deposit cryptocurrencies as collateral and borrow additional crypto-assets or funds against them.
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Crypto Lending Already Operates Across Europe
This is not a niche service existing only on a few specialized platforms. A joint report by the EBA and ESMA showed that regulators identified providers of crypto lending or borrowing of crypto-assets in at least 16 European jurisdictions.
Furthermore, some companies offer these products alongside other crypto services, such as exchange or management of digital assets. The line between a traditional crypto exchange, a financial services provider, and an intermediary providing access to DeFi is thus gradually blurring.
European regulators also warn that users may not always receive sufficiently clear information, for example, about fees, yields, changes in collateral requirements, or what happens to their funds in the event of a dispute or provider insolvency.
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Customer protection is one of the main reasons why the EBA recommends reviewing the current rules.
At first glance, some products may resemble traditional interest-bearing accounts. An investor provides stablecoins or other cryptocurrencies and earns a yield for lending them. However, the underlying mechanism can be significantly more complex than that of a standard banking product.
A joint analysis by the EBA and ESMA highlights, among other things, high financial leverage, information asymmetry, and risks arising from the repeated use of the same collateral. The interconnectedness of individual loans and collateral can, in the event of a significant market downturn, lead to a cascade of forced liquidations and spread problems across different parts of the market.
The size of the European market, however, is still relatively small compared to traditional banking. The EBA and ESMA estimated the value of the European decentralized crypto-asset lending and borrowing market at approximately 1.8 billion euros in their analysis. However, the authors themselves pointed out that accurately measuring DeFi activities is difficult due to the global and pseudonymous nature of blockchain.
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Stricter Rules for Providers Are on the Table
If the European Commission were to follow the EBA’s recommendations, only a further legislative process would determine the final form of any potential regulation.
In its current contribution to the MiCA review, the EBA is requesting the European Commission to consider regulating crypto lending not only for centralized providers but also where regulated crypto platforms make decentralized lending protocols accessible to clients.
This is particularly important due to the transformation of the DeFi market itself. Access to decentralized protocols previously often required a personal crypto wallet and at least a basic technical understanding of blockchain. Today, significantly simpler services or centralized platforms can make the same products accessible to clients.
For the average investor, it may not be immediately clear at first glance whether they are using a regulated service of the platform itself or merely accessing a decentralized protocol through its interface, to which the same level of protection may not apply.
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Stablecoins are another part of the problem
The debate also closely concerns stablecoins. The EBA states that stablecoins play a significant role in the lending and borrowing of cryptoassets. At the same time, it highlights the potential issue of regulatory arbitrage.
MiCA prohibits issuers and crypto service providers from offering interest directly to holders of electronic money tokens for holding the token. However, if a user subsequently provides a stablecoin through a lending product and starts earning a yield from it, the economic outcome can be similar to some extent.
Moreover, stablecoins are becoming central to a broader debate about MiCA amendments. The European Central Bank and national central banks this week, according to Reuters, recommended changing the current rule which requires issuers to hold part of their reserves in the form of bank deposits. According to them, the current setup could, in some situations, create risks for the banks themselves.
The EBA also states that as of September 1, 2026, 39 electronic money tokens (EMTs) have been issued under MiCA, while no asset-referenced token (ART) has yet been authorized.
MiCA may not be the final form of European crypto regulation
The current recommendations show that the European debate on crypto regulation did not conclude with the introduction of MiCA. The crypto market continues to evolve rapidly, and new services are emerging that border current rules or fall entirely outside them.
Crypto lending is one such example. For investors, it can represent a way to generate additional yield from their cryptoassets, but at the same time, it adds another layer of risk – ranging from price volatility of the asset itself, through potential collateral liquidation, to provider issues or a bug in the decentralized protocol.
The European Commission is currently evaluating comments and proposals as part of the MiCA review. Only future steps will show whether crypto lending will truly fall directly under unified European rules and how significantly any potential change would impact crypto platforms and their clients.
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