European regulators are moving toward broader restrictions on crypto products capable of generating indirect returns from stablecoins, while the European Banking Authority (EBA) is urging policymakers to bring crypto lending and DeFi access further inside the EU's regulatory framework.

The European System of Central Banks has argued that MiCA — the EU's Markets in Crypto-Assets Regulation, the bloc's framework for authorizing and supervising crypto-asset services — should extend its existing prohibition on stablecoin interest so that it also covers indirect remuneration created through lending, borrowing, staking and similar structures, as reported by CoinDesk. The proposal comes as regulators review whether crypto platforms can effectively recreate yield products despite the current ban on direct interest. How regulators resolve that direct-versus-indirect distinction will define the boundaries for yield-style stablecoin products across the EU.

In a separate recommendation, the EBA urged the European Commission to examine regulation of crypto-asset lending and borrowing, including services that connect customers to decentralized lending protocols. The authority said these activities are expanding across EU member states and can create consumer risks involving leverage, collateral, fees, disclosures and potential losses. Lending and borrowing currently sit outside MiCA's core rulebook, which is why the EBA wants them brought under assessment as the framework is reviewed.

Broader rules for DeFi access

The EBA's proposal could affect crypto-asset service providers that offer interfaces or products giving customers access to DeFi lending. Regulators are particularly focused on the growing overlap between centralized firms and decentralized protocols.

The EBA has identified several areas for possible safeguards:

• Rules covering intermediated crypto lending and borrowing
• Requirements for firms facilitating access to DeFi lending
• Greater disclosures around yields, collateral and risks
• Potential suitability and leverage controls
• Measures addressing lending involving non-compliant stablecoins

The European Securities and Markets Authority (ESMA) has also called for proportionate requirements covering staking, lending and borrowing, alongside clearer criteria for determining whether a DeFi activity is genuinely decentralized.

MiCA review could reshape crypto services

The proposals do not immediately change EU law. They form part of the ongoing review of MiCA, which regulators are using to assess activities that fall outside the framework — a process that will determine whether these recommendations eventually translate into binding rules.

MiCA currently prohibits issuers and crypto service providers from granting interest on e-money tokens — the category covering stablecoins pegged to a single fiat currency — and the rules also treat certain remuneration linked to the holding period as interest.

The Commission's review could therefore determine how regulators treat stablecoin lending, staking and DeFi access in the future. For crypto businesses, the key question will be whether new requirements apply only to intermediaries or also reach products and structures designed to provide indirect stablecoin yields.