The European Commission is reviewing if crypto lending and decentralized finance (DeFi) should fall under the Markets in Crypto Assets (MiCA) regulation. This consultation follows MiCA’s original exclusion of crypto lending from its rulebook.
On May 20, 2026, the Commission formally asked stakeholders for input on areas not covered by the initial MiCA framework. These areas include DeFi and the mechanics of crypto lending and borrowing.
Lending vaults have become a key point of contention in this review. These on-chain structures can channel billions of dollars into credit markets without resembling conventional lending operations.
The current legal status of these vaults relies on non-binding interpretations, which generally place them outside MiCA and existing EU fund rules. This creates legal uncertainty.
Yuriy Brisov, an EU digital assets lawyer and partner at Digital Analogue Partners, said the law pertaining to vaults is unclear. This lack of clarity poses a regulatory problem for policymakers.
Vaults perform the economic functions of lending, but they distribute functions across smart contracts and multiple participants. This contrasts with a single, identifiable company typically found in traditional lending models.
Decentralized lending protocol Morpho’s lending infrastructure illustrates the complexity regulators face. Its Vault V2 architecture divides responsibilities among an owner, a curator, an allocator and a sentinel.
The curator configures the vault’s strategy and risk parameters, while the allocator is responsible for executing allocations of capital. A sentinel participant possesses powers designed to reduce risk within the system.
This distribution of roles means none of the individual participants necessarily provides a regulated lending service under MiCA. Identifying a single, relevant “provider” becomes less straightforward compared to a conventional lender.
Jonathan Galea, a partner at Cahill Gordon Reindel, explored this issue in a recent client update focusing on lending vaults under EU financial regulation. His analysis examined how vault structures interact with MiCA, stablecoin rules and European fund law.
Galea cautioned policymakers against treating all lending vaults as a single category. He argued that “lending vaults solve more practical problems than they create.”
He explained that some lending vaults efficiently direct fragmented liquidity into lending markets. However, other types of vaults may engage in buying and selling crypto assets, and these should be regulated distinctly.
If Brussels opts to regulate lending broadly, a wide category covering “DeFi lending” could inadvertently capture structures with very different economic functions. This could also affect the various individuals and protocols involved in their operation.
Bitwise has announced plans to launch on-chain vaults via the Morpho protocol, demonstrating the increasing adoption and integration of these structures within the broader DeFi ecosystem.
