EU targets $54B DeFi sector as Aave slams Morpho's vault proposal as 'self-serving'
The European Union [EU] wants to bring crypto lending within the scope of the MiCA framework. In a recent policy review, the European Banking Authority (EBA) said that DeFi lending and borrowing should be regulated. EBA crafts policy and regulates the EU-wide banking sector to ensure financial stability and user protection. According to EBA, crypto lending, either via an intermediated interface of crypto asset service providers (CASPs) or DeFi protocols, can offer regulatory arbitrage for stablecoin yields. MiCA banned stablecoin yield, but some, such as Circles USDC and EURC, still earn yield via DeFi strategies. For EBA, this could cause more problems, Thus, the activities (DeFi lending) may pose regulatory arbitrage risks. Additionally, the EBA and ESMA have identified a series of potential consumer protection risks. The consumer protection risks highlighted by the watchdog include over-leverage, contagion risks, hacks, and fraud. Discover more Enterprise blockchain solutions Access Premium News Compare Exchange Rates To mitigate against these risks, EBA proposed a few considerations, including leverage caps, disclosure requirements, and cyber resilience-based certification for DeFi protocols. Source: EBA Additionally, the proposed rules could bar unlicensed stablecoins such as USDT from DeFi lending. Regulators would likely focus on platforms that give users access to DeFi protocols through intermediated lending and borrowing. The proposed EU approach differs









