European Union efforts to tighten oversight of decentralized finance (DeFi) could push crypto users toward platforms offering fewer investor protections, according to Coinbase's head of EU policy, Roeland Van der Stappen.
Van der Stappen told Cointelegraph that regulated crypto platforms could respond to stricter rules by limiting or dropping access to DeFi services.
"Rules designed to protect investors would end up pushing activity towards the places with the least protection," he said.
Regulatory proposals under discussion
In its September response to the European Commission's consultation on the Markets in Crypto-Assets Regulation (MiCA), the European Securities and Markets Authority (ESMA) recommended creating a new category of regulated crypto services for firms that give customers access to DeFi protocols.
Separately, the European Banking Authority (EBA) in September urged the Commission to study new rules for crypto lending and borrowing, including cases where regulated platforms give customers access to DeFi lending protocols. The EBA listed suitability tests, which assess whether a service is appropriate for a customer, as one option in its consultation response.
Van der Stappen said extending such tests to other DeFi services could mean treating a simple stablecoin swap the same way as leveraged lending, despite their different risk profiles.
Lending and swaps seen as most exposed
Lending, liquidity provision and on-chain swaps would be the most exposed activities, he said, adding that some providers may narrow their offerings or withdraw DeFi access altogether.
"A proportionate approach would be to allow CASPs [crypto-asset service providers] to continue offering that access with safeguards matched to the activity," Van der Stappen said.
Fragmented liquidity and 'walled gardens'
Van der Stappen said restricting access through regulated platforms could split DeFi liquidity into smaller pools and leave EU users with worse prices on trades.
He said the restrictions could encourage "walled gardens," or isolated DeFi services, and steer users toward providers outside the EU with fewer safeguards.
A 2026 Adan-Ipsos survey found that 49% of French crypto buyers preferred accessing DeFi through exchanges, compared with 14% who favored personal wallets.
A Chainalysis report on Monday attributed a modest decline in crypto activity in Germany largely to declining decentralized exchange activity. Across the EU, crypto activity grew 2.2% in the 12 months through June 2026.
A 2025 Chainalysis report described DeFi as a small but growing segment of Europe's crypto market. In the European Economic Area, May 2025 was the strongest month for DeFi lending activity in the period Chainalysis examined.
