It's very possible that an EU instance that comes under regulatory scrutiny for whatever reason will have to start requiring Data Processing Agreements (DPAs) from every instance it federates with.

Ultimately that would likely result in a few paid, professionally run instances, which only federate with each other and maybe a few similar instances in other regions with the capacity to provide DPAs.

And next to that, a forest of independent, non-conforming instances flying under the regulatory radar; an entirely separate fediverse from the centralized one where instances disappearing is a regular occurence.