Coinbase Executive: EU DeFi Proposal Could Force Users to Switch to Higher-Risk Platforms

on November 12, according to Cointelegraph, Coinbase's Europe policy head Roeland Van der Stappen stated that efforts to tighten regulation of decentralized finance (DeFi) in the EU could force users to shift to platforms offering fewer investor protections. He noted that regulated crypto platforms may consequently restrict or block access to DeFi services, adding that "rules intended to protect investors will ultimately drive activity to jurisdictions with the least protections."

In its September response to the European Commission's MiCA consultation, the European Securities and Markets Authority (ESMA) recommended creating a new regulated crypto service category for firms that provide clients with access to DeFi protocols. The European Banking Authority (EBA) also urged the commission in September to examine new rules for crypto lending, citing suitability assessments as one option. Van der Stappen noted that applying these tests to other DeFi services could equate straightforward stablecoin swaps with leveraged borrowing;

Lending, liquidity provision, and on-chain exchanges are likely to be the most impacted activities, with some providers potentially scaling back operations or completely withdrawing DeFi access. He also cautioned that limiting access through regulated platforms could fragment DeFi liquidity, create "walled gardens," and drive users to seek providers outside the EU that offer fewer protections.