European Banking Authority calls for crypto lending regulation under MiCA framework

The European Banking Authority has recommended that the European Commission expand its Markets in Crypto-Assets (MiCA) framework to regulate crypto borrowing and lending. To address risks like over-leverage, fraud, and stablecoin regulatory arbitrage, the regulator proposed introducing leverage caps, suitability tests, and a cyber-resilience certification regime for decentralized finance protocols. The proposals target regulated intermediaries connecting users to DeFi, feeding into an ongoing MiCA review consultation that closes on September 30, 2026.

EBA recommendations for MiCA

• ▪The European Banking Authority recommended on September 24, 2026, that the European Commission conduct a cost-benefit analysis of adding the intermediation of crypto borrowing and lending to the services regulated under the Markets in Crypto-Assets framework.
• ▪The European Banking Authority recommended on September 24, 2026, that the European Commission review the minimum share of stablecoin reserves that issuers must hold as bank deposits.

Proposals for CASP interaction with DeFi

• ▪The European Banking Authority proposed a certification regime for decentralized finance lending protocols to assess their resilience against cyberattacks before regulated firms can connect to them.
• ▪The European Banking Authority proposed setting specific regulatory requirements for licensed crypto-asset service providers that connect clients to decentralized finance lending protocols.

Addressing stablecoin lending risks

• ▪The European Banking Authority stated that crypto lending via centralized intermediaries or decentralized finance protocols poses regulatory arbitrage risks by allowing users to earn yields on stablecoins.
• ▪The European Banking Authority suggested restricting crypto-asset service providers from facilitating lending that involves stablecoins that lack authorization under the Markets in Crypto-Assets framework.

Mitigating leverage risks

• ▪A January 16, 2025, joint report by the European Banking Authority and the European Securities and Markets Authority identified excessive leverage and collateral reuse across transaction chains as key risks in crypto lending.
• ▪The European Banking Authority proposed introducing leverage caps for some or all users of crypto lending services to mitigate risks like over-leverage and contagion.

Proposed user protection measures

• ▪The European Banking Authority proposed implementing suitability tests and detailed pre-contractual disclosures for users accessing crypto borrowing and lending services.
• ▪The European Banking Authority proposed requiring clear warnings to users that activities on truly decentralized protocols are unregulated and lack regulatory safeguards.

European Commission consultation and reporting timeline

• ▪The European Commission's targeted consultation on the Markets in Crypto-Assets review opened on May 20, 2026, and closes on September 30, 2026.
• ▪Under Article 140 of the Markets in Crypto-Assets regulation, the European Commission must report on the application of the framework by June 30, 2027, which may include legislative proposals.

Debatable claims

• ▪Restricting crypto platforms from lending unauthorized stablecoins does more harm than good
• ▪The European Union should regulate crypto borrowing and lending under the MiCA framework
• ▪Extending the stablecoin interest ban to lending and staking products is justified to prevent bank-like runs
• ▪Mandatory cyber-resilience certification for DeFi protocols goes too far in restricting decentralized innovation