The European Union's push to tighten oversight of decentralized finance (DeFi) could drive crypto users toward platforms that offer fewer investor protections, according to Coinbase's head of EU policy.

Roeland Van der Stappen told Cointelegraph that regulated crypto platforms could respond to the proposed 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,” Van der Stappen said.

Regulatory proposals under MiCA review

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. MiCA — the EU's comprehensive crypto-asset framework, fully in force since the end of 2024 — obliges the Commission to assess whether crypto-assets issued or used in a decentralized manner fall within its scope, and both regulators' September responses feed directly into that assessment.

Also in September, the European Banking Authority (EBA) urged the Commission to study new rules for crypto lending and borrowing, including cases where regulated platforms give customers access to DeFi lending protocols. In its consultation response, the EBA listed suitability tests — assessments of whether a service is appropriate for a given customer — as one option.

Van der Stappen cautioned that extending such tests to other DeFi services could mean treating a simple stablecoin swap the same way as leveraged lending, despite their differing risk profiles. He identified lending, liquidity provision and on-chain swaps as the activities most exposed under the proposed approach, noting that some providers may narrow their offerings or withdraw DeFi access entirely.

“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. CASPs are firms licensed under MiCA to provide crypto-asset services across the EU.

Coinbase warns of fragmented liquidity

Restricting DeFi access through regulated platforms could split liquidity into smaller pools and leave EU users with worse prices on trades, Van der Stappen warned. He said the restrictions could encourage “walled gardens” — isolated DeFi services — and steer users toward providers outside the EU that operate with fewer safeguards.

Market data underlines how central exchanges are to European DeFi usage. A 2026 survey by Adan, France's digital-asset industry association, and Ipsos found that 49% of French crypto buyers preferred accessing DeFi through exchanges, compared with 14% who favored personal wallets.

A Chainalysis report published 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.