Coinbase Executive: EU DeFi Proposal May Force Users to Move to Higher-Risk Platforms

TechFlow reported on November 12, citing Cointelegraph, that Roeland Van der Stappen, Coinbase's EU Policy Lead, said the EU's efforts to tighten regulation of decentralized finance (DeFi) could force users to move to platforms with fewer investor protections. He noted that regulated crypto platforms may consequently restrict or remove access to DeFi services, saying "rules intended to protect investors may ultimately push activity to the least-protected places."

In its response to the European Commission's MiCA consultation in September, the European Securities and Markets Authority (ESMA) proposed creating a new regulated crypto services category for companies offering clients access to DeFi protocols. The European Banking Authority (EBA) also urged the European Commission in September to study new rules for crypto lending and listed suitability tests as one option. Van der Stappen said extending such tests to other DeFi services could mean treating simple stablecoin swaps the same as leveraged lending;

Lending, liquidity provision, and on-chain swaps would be the activities most affected, and some providers may scale back services or even exit DeFi access entirely. He also warned that restricting access on regulated platforms could fragment DeFi liquidity, create "walled gardens," and push users toward providers outside the EU with fewer safeguards.

Source: TechFlow