DeFi's Rise Forces Coinbase to Embrace Decentralization

Coinbase, the leading U.S.-based cryptocurrency exchange, is navigating a shifting landscape as decentralized finance (DeFi) and political developments reshape the crypto sector in 2025. The company’s market dominance has declined, with its global trading share dropping to 4.5%-5.8%, according to financial reports. This decline is attributed to intensified competition from DeFi protocols and the growing influence of pro-crypto policies under the Trump administration, which has spurred new entrants and innovation in the market. Coinbase’s pivot toward onchain finance and decentralized products reflects its strategy to adapt to these dynamics.

The surge in DeFi adoption has historically redirected trading volumes from centralized exchanges, a trend amplified in 2025 by favorable regulatory signals and technological advancements. While DeFi platforms like Aave and Compound have solidified their roles as infrastructure for low-risk lending and stablecoin yields, Coinbase faces pressure to integrate decentralized solutions into its ecosystem. The exchange has emphasized expanding its decentralized offerings, including partnerships with layer-2 networks and onchain financial tools, to retain relevance in a market increasingly defined by open, trustless systems.

Coinbase’s strategic shift aligns with broader industry trends, including the maturation of DeFi and the rise of institutional-grade protocols. Total value locked (TVL) in DeFi protocols reached $170 billion in September 2025, a recovery from the Terra collapse of 2022. This growth underscores the sector’s resilience and its potential to serve as a sustainable revenue stream for blockchain platforms. For Coinbase, the challenge lies in balancing its centralized exchange model with the decentralized infrastructure that underpins DeFi’s expansion.

Political developments further complicate Coinbase’s position. Trump’s pro-crypto stance has invigorated U.S. market competition, with new exchanges and protocols leveraging regulatory clarity to attract users. Coinbase CEO Brian Armstrong has advocated for a clear regulatory framework to support innovation, noting the importance of stablecoin adoption and institutional participation. “We need clear rules for crypto in America if we want to remain an innovation leader,” Armstrong stated, highlighting the exchange’s alignment with broader policy goals.

The interplay between DeFi growth and centralized exchange dynamics highlights a broader industry transformation. While Coinbase’s trading volumes and profits have declined, the exchange’s focus on decentralized products positions it to capitalize on long-term trends. The rise of low-risk DeFi protocols, which offer stable yields and institutional-grade security, suggests a shift toward utility-driven blockchain applications. Coinbase’s ability to integrate these solutions while maintaining its role as a regulated exchange will determine its success in a market increasingly defined by decentralization.