very funny broThey will NOT 'just kill crypto innovation in Europe'. It will allow innovation that has to have a viable business use case and is based on a (fairly) sound and legal basis as opposed to the early scam and scandal ridden Wild West days of ICO's and their later variants such as Ordinals, Runes, meme coins, etc.
Yes it will require records of who owns and runs the businesses. ALL legitimate businesses no matter what they are need that. DeFi projects have people behind the scenes running and maintaining them. Even if just to boost customer confidence in them, those people must be known. You view that as a 'problem' why?
I don't really understand what ICOs have to do with Dex and Defi platforms to be honest? Dapps are designed to be trustless in order to avoid being scammed by custodial platforms, it's the opposite of all those shady ICO projects.
Setting up a platform in a country that does not regulate it will be of zero use to users in the EU (and USA) unless you intend to ONLY use crypto to pay for all of your needs. As soon as you (try to) exchange your crypto into fiat you will be screwed because your assets have no proof of origin.
Come to think of it, even just using crypto for your expenses will not work unless you only deal through the black markets because all reputable vendors will also want 'clean and verifiable' coins/tokens/etc as payment.
Maybe you don't know it because you're a bitcoin maximalist(it would explain why you don't care about Defi and Dapps) but currently most crypto wallets are offering swap features using Dex services without any KYC. So if those coins will be rejected by fiat exchanges and merchants, 90% of circulating coins are going to be worthless. In addition I don't think EU authorities will be able to stop p2p exchanges, that is to say marketplaces where people are exchanging fiat and cryptos each other. On top of that Switzerland still allows to exchange cryptos for fiat without KYC when transactions are under 1000€.