Europe is reopening a question it left unanswered when it wrote its landmark crypto rulebook: should decentralized lending fall under regulation at all? According to Cointelegraph, the European Commission launched a targeted consultation on May 20, 2026, asking stakeholders to weigh in on areas deliberately left outside the original Markets in Crypto-Assets (MiCA) framework — chief among them decentralized finance and crypto lending and borrowing. The consultation closes on September 30, 2026.
At the center of the debate sit lending vaults, which can route billions of dollars into onchain credit markets without resembling a conventional lender. Their legal status today rests on non-binding interpretations that they fall outside both MiCA and existing EU fund rules — a fragile footing if Brussels decides to bring lending inside the regulatory perimeter.
The trouble, lawyers told Cointelegraph, starts with definitions. “EU law has no category called a ‘vault,’” said Yuriy Brisov, an EU digital-assets lawyer and partner at Digital & Analogue Partners. “A lawyer therefore defines it the way a regulator would qualify it: by function, not by label.” A vault can perform the economic role of lending while scattering its other functions across smart contracts and multiple participants rather than a single company.
The lending protocol Morpho illustrates why identifying a “provider” is so hard. Its Vault V2 architecture splits responsibilities among an owner, a curator who configures strategy and risk parameters, an allocator who executes allocations, and a sentinel with powers meant to reduce risk. None of those roles neatly maps onto a regulated lending service — yet together they blur the line of who would be accountable. Asset manager Bitwise is planning to launch onchain vaults via Morpho, a sign the model is spreading rather than receding.
Jonathan Galea, a partner at Cahill Gordon & Reindel, warned against lumping everything together. Treating “DeFi lending” as a single label, he argued, risks capturing structures that deserve opposite answers. And making decentralization the dividing line carries its own trap: Galea cautioned it could penalize newer, more novel protocols while entrenching mature incumbents that have had years to distribute control.
Brisov suggested a structural test instead — one that asks whether there is any undertaking or appointed manager, whether the holder has a direct coded claim on the pool, and whether users can exit before any parameter change takes effect. If Brussels concludes lending warrants oversight, he said, it should explicitly add lending and borrowing to the list of regulated crypto-asset services rather than broadening the definition of a service provider itself.
Curve Finance founder Michael Egorov struck a similar note, telling Cointelegraph that DeFi lending, if ever regulated, “should be treated completely differently” from traditional finance — it may not need some conventional safeguards while requiring others that legacy rules never imagined.
MiCA already excludes crypto-asset services provided in a “fully decentralized manner,” though it can still apply where only part of an activity is decentralized. That carve-out is exactly what the current consultation is testing. For Brussels, the challenge is less whether to regulate DeFi lending than how to write rules that distinguish between very different forms of onchain credit — and the people, if any, who actually control them.
Written for Red Robot with AI assistance and human editing. Based on reporting by Cointelegraph.
