European Banking Authority proposes crypto lending regulations for consumer protection

The European Banking Authority said on Tuesday that it will push for specific crypto‑lending rules as part of the EU’s Markets in Crypto‑Assets (MiCA) review, targeting firms that offer loans against digital assets and those that connect users to DeFi protocols. The call comes as the EBA prepares its final report for the European Commission, which is expected to shape the next phase of the continent’s crypto framework.

The move follows a wave of high‑profile crypto‑lending collapses that left retail investors with large losses. In the past two years, firms such as Celsius, Voyager and Three Arrows Capital have defaulted on loans, exposing gaps in supervision. The EU introduced MiCA in 2023 to bring a unified set of rules for crypto assets, but the original text left lending largely untouched. Regulators now see lending as a fast‑growing segment that could threaten financial stability if left unregulated.

The EBA’s draft guidance proposes that crypto‑lending platforms obtain a banking‑type licence and hold capital buffers proportional to the size of their loan books. It also calls for transparent disclosure of interest rates, collateral valuation methods and risk‑management policies. The authority wants firms to conduct stress tests and maintain liquidity reserves to cover sudden market drops. According to industry data, the European crypto‑lending market is worth roughly €10 billion, a figure that could double by 2027. The European Commission welcomed the proposals, saying they will protect consumers, while some crypto trade groups warned that heavy licensing could stifle innovation.

The next step is a formal adoption of the EBA’s recommendations by the European Commission, likely before the end of the year. Once approved, the rules will be incorporated into the MiCA framework and become enforceable across all EU member states. Firms will have a transition period to adjust their operations, and regulators will monitor compliance closely. The outcome will shape how European investors access crypto credit and could set a benchmark for other jurisdictions considering similar oversight.