The European Union faces a September 30 deadline to decide the future of its DeFi loans.

- What's going on?

The European Banking Authority (EBA), the EU's banking regulator, sent a letter to the European Commission on September 24 asking it to consider revising Regulation MiCA (Markets in crypto -Assets) regarding global lending services, specifically where crypto companies act as "gateways" bringing customers into blockchain-based lending.

The proposal encompasses two variants: the addition of "crypto-lending intermediaries" to the list of services provided by crypto asset providers (CASPs), and specification for a CASP that allows customers access to the DeFi protocol via an interface or product.

Why is this important?

Currently, DeFi credits work on virtual contracts that run automatically on the blockchain, but typical users often do not interact with a contract directly except through an app or interface owned by the company, such as MetaMask 's manual describing how to deposit coins into Aave 's pool via mobile apps, or Aave , itself, which states that the user has accessed the protocol through another application interface or a direct virtual contract.

The EBA believes that these "pathways" should be within the Commission's scope of consideration because they are channels over which companies have control, and identifies them as being primarily caused by risks to consumers, whether it is fee information, rebates or incomplete collateral swaps, loss-intensifying leveraged loans, customer fund pooling problems, fraudulent schemes, hacking, poor recordkeeping, as well as a lack of credit checks that can lead to excessive debt burden.

What's the offer?

The EBA proposes six safeguards for the Commission to consider, none of which have yet become binding rules:

• Suitability test To consider whether a client should participate, with leverage ceilings and more detailed disclosures.
• Another warning. That the use of virtually zero-distributed protocols may not be legally protected, and the notion of assuring resilience to cyberattacks by credit protocols.
• Prohibiting the CASP from doing credit business. token or e-money token , according to MiCA but the issuer is not authorized

How will it affect users?

The Commission's targeted consultation will close on 30 September at 23:59 CET. Feedback will be used to write the MiCA enforcement report, which the Commission has indicated it may include if appropriate.

Crypto users in Europe (and potentially affecting regulatory standards in other regions including Thailand with its the SEC (Thailand) framework already in place) should be aware of where the dividing line is drawn. Applications that take a user to DeFi credits may require checks or warnings at entry point, while Binance protocols continue to operate.