The European Commission is reviewing whether crypto lending and decentralized finance vaults should fall under the Markets in Crypto Assets (MiCA) framework. On May 20, 2026, the Commission formally invited stakeholders to provide input on areas not covered by the initial MiCA rulebook, including DeFi lending and borrowing structures that were explicitly excluded from the regulation's original scope.
DeFi lending vaults currently channel billions of dollars into on-chain credit markets. These structures do not resemble conventional lending models, creating ambiguity regarding their legal standing. Their current legal status depends on non-binding interpretations, suggesting they fall outside MiCA and existing EU fund regulations.
Yuriy Brisov, an EU digital assets lawyer and partner at Digital Analogue Partners, said the law pertaining to these vaults is unclear. Vaults perform the economic functions of lending but distribute operational elements across smart contracts and multiple participants rather than centralizing them within a single company, Brisov said.
The architecture of protocols like Morpho's lending infrastructure illustrates the complexity facing regulators. Morpho's Vault V2 divides responsibilities among an owner, a curator, an allocator, and a sentinel. The curator defines strategy and risk parameters, while the allocator manages execution and the sentinel possesses powers designed to mitigate risk. This distributed model complicates the identification of a single "provider" of regulated lending services under MiCA.
Jonathan Galea, a partner at Cahill Gordon Reindel, said policymakers should avoid treating all lending vaults as a single category. Vaults solve more practical problems than they create, directing fragmented liquidity into lending markets, Galea said. He distinguished between vaults primarily focused on lending and those that buy and sell crypto assets, arguing they warrant different regulatory treatment. A broad regulatory category covering "DeFi lending" could inadvertently encompass structures with distinct economic functions and varying control mechanisms, Galea warned.
MiCA currently excludes crypto asset services provided in a "fully decentralized manner." However, the regulation can apply where only a portion of an activity is performed decentralized—adding another layer of complexity for vaults with mixed operational models.
The European Commission's targeted consultation on the MiCA review is scheduled to close on Sept. 30. The outcome will determine whether lending vaults remain outside MiCA's scope or become subject to a new regulatory framework.
