Coinbase warns proposed EU DeFi rules could fragment liquidity

Coinbase’s head of EU policy warned that proposed EU oversight of decentralized finance could divert users toward providers with fewer investor protections, even as 49% of surveyed French crypto buyers preferred exchange-based access in 2026. Another 14% favored personal wallets, according to the Adan-Ipsos survey.

Roeland Van der Stappen told Cointelegraph that applying suitability tests beyond crypto lending and borrowing could limit regulated platforms’ DeFi services. “Rules designed to protect investors would end up pushing activity towards the places with the least protection,” he said.

What changes are regulators considering?

In September, the European Securities and Markets Authority recommended a new category of regulated crypto services for firms that give customers access to DeFi protocols. The authority made its recommendation in response to the European Commission’s consultation on the Markets in Crypto-Assets Regulation, or MiCA.

Also in September, the European Banking Authority urged the Commission to study new rules for crypto lending and borrowing. The proposed review would include cases where regulated platforms give customers access to DeFi lending protocols.

The EBA listed suitability tests as one option in its consultation response. Such tests assess whether a service is appropriate for a customer, rather than applying one framework to every DeFi function.

Van der Stappen said extending those tests to other services could treat a simple stablecoin swap like leveraged lending, despite their different risk profiles. He identified three activities as most exposed:

• Lending
• Liquidity provision
• On-chain swaps

Providers could respond by narrowing their offerings or withdrawing DeFi access altogether. Van der Stappen argued for activity-specific safeguards instead: “A proportionate approach would be to allow CASPs [crypto-asset service providers] to continue offering that access with safeguards matched to the activity,” he said.

Could tighter access fragment liquidity?

Van der Stappen said restrictions through regulated platforms could split DeFi liquidity into smaller pools and leave EU users with worse trade prices. The limits could also encourage isolated DeFi services and steer users toward providers outside the EU with fewer safeguards.

The 2026 survey preference gap gives exchanges a larger distribution role among the surveyed French crypto buyers. Any rule that limits platform access could therefore affect the route preferred by the largest group in that survey.

A Chainalysis report published Monday attributed a modest decline in crypto activity in Germany largely to lower decentralized-exchange activity. Across the EU, however, crypto activity grew 2.2% in the 12 months through June 2026.

A separate 2025 Chainalysis report described DeFi as a small but growing segment of Europe’s crypto market. Within the European Economic Area, May 2025 was the strongest month for DeFi lending during the period the company examined.

France has also proposed liability for crypto exchanges offering DeFi access. That proposal adds a national liability question to the EU-level debate over suitability tests and service classifications.

The immediate market-structure test is whether regulated platforms narrow or withdraw DeFi access while the Commission considers ESMA’s recommended category and the EBA’s requested review.