On 16 January 2025, the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) issued a joint report on recent developments in crypto-assets, analysing decentralised finance (DeFi) and crypto lending, borrowing and staking.

As regards DeFi the joint report finds, among other things, that:

  • DeFi remains a niche phenomenon, with amounts locked in DeFi protocols representing 4% of all crypto-asset market value at the global level.
  • EU adoption of DeFi, while above global average, is behind other developed economies (e.g. the US, South Korea).
  • The number of DeFi hacks and the value of stolen crypto-assets has generally evolved in correlation with the DeFi market size. While historically the majority of DeFi hacks have stemmed from on-chain vulnerabilities (mainly through the exploit of smart contract vulnerabilities), recent attacks on DeFi appear to be more successful when exploiting off-chain vulnerabilities (e.g. compromising users’ private keys).
  • DeFi protocols present significant risks of money laundering/terrorist financing, with flows on decentralised exchanges representing 10% of spot crypto trading volumes globally. This is mainly due to the current absence of adequate anti-money laundering / countering the financing of terrorism controls, which means that users can transact in practice without being identified and verified.

In terms of lending, borrowing and staking of crypto-assets the joint report finds, among other things, that:

  • Crypto lending, borrowing and staking services are offered by a number of crypto-asset service providers in EU jurisdictions, which in some cases also offer regulated crypto-asset services.
  • Users may receive insufficient information on conditions in relevant areas such as fees, interest rates paid or yields, changes to collateral requirements, the actions the service provider may take with regard to any assets used as collateral or placed in a staking account, or rights and liabilities in case of dispute or insolvency.

Next steps

The joint report is the EBA and ESMA’s contribution to the production of the European Commission’s report to the European Parliament and Council on recent developments in crypto-assets in accordance with Article 142 of the Regulation on markets in crypto-assets.