The European Banking Authority (EBA) has called for crypto lending to be brought under the European Union's Markets in Crypto-Assets (MiCA) framework as regulators weigh potential changes to the bloc's crypto rulebook.

In a response to the European Commission's (EC) targeted consultation on MiCA, the EBA said crypto borrowing and lending should be regulated, including where crypto asset service providers facilitate access to decentralized finance (DeFi) lending protocols.

MiCA, the EU's comprehensive rulebook for crypto assets, sets authorization and conduct requirements for crypto asset service providers, but intermediated crypto borrowing and lending not currently among the services it regulates — the gap the EBA's recommendation is designed to close.

The regulator recommended that the EC conduct a cost-benefit analysis of legislative changes that could add the intermediation of crypto borrowing and lending to the list of services regulated under MiCA, a move that could introduce specific compliance requirements and oversight activity. It also suggested requirements for crypto firms that provide clients with access to DeFi lending protocols.

Among the potential measures outlined were suitability tests for users, leverage limits and additional disclosure requirements — supervisory tools that are well established in traditional financial markets. The EBA also raised the possibility of restricting access to lending involving asset-referenced tokens or e-money tokens that require MiCA authorization, as well as introducing a certification regime for DeFi lending protocols.

The authority said crypto lending is growing across the bloc, citing previous research that identified borrowing and lending activity in at least 16 EU member states. It added that easier access to DeFi through crypto firms and artificial intelligence tools is increasingly blurring the boundary between centralized and decentralized finance — activity that currently falls outside MiCA's authorization and disclosure requirements.

The recommendations form part of the EBA's broader input into the EC's review of MiCA, which also covers stablecoin rules, crypto-asset classification and reporting requirements. Any resulting changes would require a legislative proposal from the Commission and adoption by the European Parliament and the Council, making the outcome of the review the next milestone for firms and users in the sector.