The United Kingdom is nearing a pivotal decision on how decentralized finance (DeFi) should fit into the country’s emerging crypto regulatory framework. In an opinion piece, Coinbase policy head for Europe Katie Harries argues that regulators should enable access to DeFi through regulated gateways—rather than, in practice, shutting it out.
The core issue is the Financial Conduct Authority’s (FCA) approach to authorising crypto firms. Harries warns that proposed rules could require regulated platforms to execute customer orders only on FCA-authorised venues, a condition she says may be incompatible with how many DeFi protocols and decentralized exchanges operate, where there is no single accountable entity to gain FCA authorisation.
Key takeaways
- The FCA’s proposed authorisation and execution requirements could unintentionally restrict access to DeFi for UK customers via regulated platforms.
- Coinbase policy head Katie Harries says the rules risk functioning as a de facto prohibition from October 2027 if the FCA doesn’t adjust course.
- Harries argues that regulators in the EU and US are exploring ways to let DeFi innovation coexist with oversight, and the UK should do the same.
- The recommended direction is to regulate the “gateway” and consumer disclosures rather than attempt to exclude decentralised infrastructure entirely.
- If UK access becomes harder, tokenised capital markets and related financial innovation may concentrate in jurisdictions that support DeFi infrastructure.
Why the FCA’s rules could collide with DeFi’s mechanics
DeFi is built on software that enables users to borrow, lend, and trade directly with one another, without relying on a traditional intermediary such as a bank or broker. The premise is often framed as bringing more direct, faster, and potentially cheaper financial services through open infrastructure.
Harries acknowledges that DeFi can always be accessed through open-source or decentralised routes. Her argument is about whether UK customers will also be able to reach DeFi through regulated providers that can offer clarity on what users are accessing and what risks apply.
According to the opinion, the FCA’s proposed cryptoasset regime raises the possibility that regulated platforms may not be able to provide DeFi integrations as customer orders must be executed on an FCA-authorised venue. The FCA’s stated aim, as described in the piece, is to prevent overseas firms from accessing the UK market illegally. However, the concern raised is that decentralised protocols and exchanges typically do not have a direct, single “person behind them” that can become authorised in the same way centralized venues can.
The opinion points to a broader implication: even if no rule explicitly bars DeFi integrations, the combination of execution and authorisation expectations could create practical barriers that amount to an effective ban.
October 2027 authorization timeline raises the stakes
The piece also references the UK’s wider move toward a more complete regulatory rulebook for crypto services. It notes that from Oct. 25, 2027, firms offering crypto services to UK customers will need FCA authorization.
In parallel, the FCA is said to be consulting on guidance about how its rules apply to firms providing financial services that use or interact with DeFi. Harries frames this as a crucial decision point: if the approach remains unchanged, regulated platforms may have limited ability to support DeFi access for UK customers when the authorization requirement takes effect.
From an investor and market-structure standpoint, the timing matters because it determines whether UK-regulated entities can reasonably plan for DeFi-related product roadmaps. If DeFi access becomes difficult, the ability for UK firms to participate in, influence, or supervise consumer interactions with onchain finance could shrink—potentially reducing UK firms’ leverage in shaping how tokenised infrastructure develops.
International signals: the EU and US are trying to bridge the gap
Harries argues that other regulators are actively working on the compatibility problem rather than defaulting to exclusion.
In the European Union, the opinion cites proposed ESMA work suggesting regulated firms could provide access to DeFi in a “regulated and transparent environment.” In the US, the piece refers to an “Innovation Exemption” granted by the Securities and Exchange Commission for peer-to-peer trading of tokenized stocks using automated trading systems and liquidity pools.
While the opinion does not claim the UK can copy these frameworks directly, its thrust is comparative: if the EU and US are exploring routes for traditional finance to integrate with DeFi-like mechanisms, the UK should treat the issue as a design challenge for supervision rather than as a reason to cut off access.
Regulate disclosures and supervision—not decentralised technology itself
Another theme in Harries’ argument is that the FCA’s goals—consumer protection and preventing misuse—do not necessarily require a prohibition on DeFi integrations.
The opinion outlines three areas of concern it says regulators are targeting: consumers may not fully understand when they are moving from a regulated environment into something with different protections; some firms could attempt to use DeFi integrations to avoid regulatory responsibilities; and DeFi could introduce issues related to financial crime and market resilience.
Harries contends that these risks point more to the need for clearer information and defined responsibilities than to outright exclusion. She argues regulated platforms can provide a supervision anchor by clearly telling users when they are leaving regulated coverage and by requiring consent before enabling access to decentralised protocols.
She also suggests regulated firms can curate which protocols to connect, assess operational and governance risks, and report incidents and usage to regulators—elements she presents as practical tools for oversight.
The opinion draws an analogy to other parts of retail finance: the FCA, it says, already permits platforms to offer access to multiple product types with different regulatory protections, as long as consumers are informed about which protections apply. In that framing, the issue is not whether users can access unregulated products at all, but how well firms disclose and supervise those transitions.
Where consumers will go next—and what that means for UK competition
DeFi protocols, the opinion notes, can already be accessed directly without regulated intermediaries. The policy question, therefore, is less about whether DeFi exists and more about whether regulated gateways will be available for consumers who prefer familiar onboarding and clearer disclosures.
Harries argues that the stakes extend beyond crypto trading. She emphasizes that DeFi and related onchain tokenised finance may offer major cost and efficiency benefits by reducing the need for costly intermediaries and enabling 24/7 cross-border activity.
On that basis, she warns that if the UK makes regulated access to DeFi harder, innovation could shift toward other jurisdictions that are more receptive to DeFi infrastructure. The opinion ties this to the UK’s stated ambition to lead in digital assets, suggesting that leadership in policy and market competitiveness may be undermined if domestic firms are cut off from the underlying infrastructure where future financial services are being built.
As the FCA continues its crypto guidance consultation and approaches the 2027 authorisation deadline, readers should watch for how the regulator interprets venue-authorisation rules in relation to decentralized execution, and whether it provides a workable supervision model that lets consumers access DeFi with clear disclosures rather than by defaulting to exclusion.
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