On 8 April 2022, the EBA published a final report on non-bank lending in the EU. The report covers market developments and trends in FinTech and BigTech lending, as well as non-bank lending carried out by newer financial actors such as cryptocurrency exchanges. The points and findings with regard to the cryptocurrency sector are as follow:
- Crypto-asset lending and borrowing activities can happen in different formats, for example, bilaterally through peer-to-peer (P2P) matching platforms, or based on so-called ‘liquidity pools’.
- In decentralised crypto-asset lending platforms, crypto-asset borrowers mainly benefit from the fact that, compared to traditional bank lending, they are not subject to credit scoring assessments in order to borrow. For instance, some platforms allow different types of unsecured lending such as ‘credit delegation’ or ‘flash loans’ (obtained without either collateral or credit scoring assessment).
- Other processes, such as ‘staking’ and ‘crowd loans’, related to crypto-asset transaction validation on proof-of-stake (PoS) could be understood as a source of passive income for crypto-asset holders, and hence policymakers and supervisors may need to assess whether these processes could be considered as non-bank lending.
- Existing data suggest that the take-up of crypto-asset lending activities in the EU is growing but is still limited in terms of volumes and values. However, crypto-asset lending and borrowing can become an important source of non-bank lending, as intermediation is either carried out by crypto-asset service providers (CASPs) or through automated and decentralised platforms. Moreover, the crypto-lending and staking activities are increasingly being undertaken and/or offered to customers by crypto-asset exchange service providers, who are broadening their activities by adding new services to their platforms. In addition, the multi-faceted nature of the products and services may give rise to potential conflicts of interest (i.e. where a crypto-asset exchange platform is not a neutral party to a transaction or trade and does not provide sufficient consumer protection safeguards).
Consequently, the EBA will pay attention to the wider regulatory and policy implications of crypto-asset lending, namely regarding the interplay with the proposed EU Regulation on Markets in Crypto-assets (MiCA).