Coinbase executive cautions against broader EU DeFi suitability tests

By Elena Vasquez

The European Banking Authority asked the European Commission to study crypto lending rules and DeFi access through platforms, with a report to EU lawmakers due by June 30, 2027.

The report could include proposals to amend the Markets in Crypto-Assets Regulation (MiCA). The European Securities and Markets Authority has separately recommended a regulated category for firms connecting customers to DeFi protocols within that review.

What does the EBA consultation cover?

The EBA listed customer suitability tests as one option in its consultation on crypto lending and borrowing. A suitability test assesses whether a service is appropriate for a customer, rather than applying one rule to every financial activity.

Coinbase’s head of EU policy, Roeland Van der Stappen, warned against extending those checks beyond lending and borrowing. That extension was hypothetical in his warning; the EBA consultation did not cover it.

Van der Stappen used a basic stablecoin swap and leveraged lending to illustrate the problem. The two activities carry different risks, he said, although a broader test could treat them alike. A rule designed for one risk profile may not fit another with equal precision.

The practical distinction is simple: the consultation considers crypto lending, not every DeFi service.

Which DeFi activities face the most risk?

Van der Stappen identified lending, liquidity provision and on-chain swaps as the three DeFi activities most exposed to restrictions. Those services could face checks developed for crypto lending if the broader approach advanced.

He warned that regulated platforms could respond by narrowing their DeFi offerings or withdrawing access altogether. Both responses would narrow the services available to EU users.

If those limits steer users toward providers outside the EU with fewer safeguards, DeFi liquidity could divide among smaller pools. That fragmentation could worsen trade prices for EU users.

That outcome could produce “walled gardens,” or isolated DeFi services. Van der Stappen said: “Rules designed to protect investors would end up pushing activity towards the places with the least protection.”

The warning provides no liquidity or execution-cost estimates, so the size of that effect remains unquantified. In plain terms, a safeguard for one activity could constrain several others.

What does ESMA recommend?

The European Securities and Markets Authority (ESMA) recommended a regulated service category for firms that connect customers to DeFi protocols. Its recommendation focuses on service providers, rather than on a single suitability test for all DeFi activity.

The EBA and ESMA are addressing separate elements of the same review. ESMA addresses the firms that connect customers to protocols; the EBA consultation concerns crypto lending and borrowing. The EBA also asked the Commission to study crypto lending rules and DeFi access through platforms.

Van der Stappen favors allowing crypto-asset service providers to continue offering DeFi access, with safeguards matched to each activity. That is a policy preference, not a regulatory decision described in either process.

In practical terms, the two tracks address who may provide access and what customer checks should apply.

What could change by 2027?

Neither process, as described, extends suitability tests across all DeFi or orders platforms to withdraw services. The EBA measure remains a consultation with suitability tests listed as one option, and the ESMA measure remains a recommendation for service providers.

The Commission’s report due by June 30, 2027 could include proposals to amend MiCA. Broader DeFi suitability testing remains hypothetical, not an adopted requirement.

The practical takeaway is that the next formal checkpoint is June 30, 2027, when the Commission could propose MiCA changes for crypto lending and platform-based DeFi access.