The European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) have released a joint report analyzing crypto-assets, decentralized finance (DeFi), and related activities for the European Union Commission’s Markets in Crypto-Assets Regulation (MiCAR). The announcement was made in a press release on January 16.
According to the EBA and ESMA report, DeFi accounts for 4% of the global crypto-asset market. While EU adoption exceeds the global average, it still trails behind countries such as the United States and South Korea. The report notes a correlation between DeFi hacks, stolen assets, and market size. It identifies risks of money laundering and terrorist financing linked to decentralized exchange flows, which represent 10% of global spot crypto trading volumes.
Regarding crypto lending, borrowing, and staking, the report highlights limited participation by EU consumers and financial institutions. Risks include excessive leverage, information gaps, and systemic issues such as re-hypothecation and interconnectedness. Although no immediate financial stability risks have been identified, these findings contribute to the European Commission’s regulatory review under MiCAR.
MiCAR requires crypto-asset service providers to obtain authorization to operate through national approval or notification if previously authorized. The regulation enforces requirements for governance, client asset protection, prudential standards, and adherence to anti-money laundering (AML) and cybersecurity rules.
The EBA is an independent EU agency responsible for ensuring effective and consistent regulation and supervision in the European banking sector. Its primary mission is to enhance the stability and integrity of the EU financial system through transparent and fair regulation. It also conducts risk assessments, oversees digital and operational resilience, and works to prevent financial crime.
ESMA is the EU’s financial markets regulator focusing on investor protection, orderly markets, and financial stability. Established in 2011 following the de Larosière report, ESMA promotes consistent supervision across Member States, collaborates with banking and insurance authorities, and reports to EU institutions.
