The United States Securities and Exchange Commission (SEC) is allegedly investigating the startup behind the biggest decentralized crypto exchange in the world, Uniswap. Enforcement attorneys are said to be looking for information about Uniswap’s marketing and investor services.
September 3 Wall Street Journal report says that the US securities watchdog has launched a probe into the exchanges’ main developer, Uniswap Labs. The attorneys decided to investigate a tip-off from anonymous sources that are believed to be familiar with the matter.
One spokesperson from Uniswap Labs allegedly stated that the company is:
“committed to complying with the laws and regulations governing our industry and to providing information to regulators that will assist them with any inquiry.”
Uniswap is a decentralized exchange (DEX) that enables the users to swap between Ethereum-based tokens and coins without the participation of any central entity. The cryptocurrency exchange is ranked as the biggest DEX with a $1.5 million trading volume in the last 24 hours at the time of publication, based on data acquired from CoinMarketCap.
This news comes amid the United States regulators growing attention to the decentralized finance (DeFi) sector, with SEC chairman Gary Gensler announcing in August that the regulator is planning for more cryptocurrency-related rules that will target token offerings, DeFi, and the stablecoins.
Late last month, the regulator signed a $125K deal with AnChain.AI blockchain analytics company. This deal will help the SEC to get some technical assistance in monitoring and regulating the budding decentralized finance space.
Before the SEC’s massive efforts to look into the DeFi space, Uniswap delisted hundreds of tokens and tokenized stocks from its platform. The exchange delisted the tokens citing massive regulatory pressure. While pointing out similar moves taken by other decentralized finance players, Uniswap said:
“We monitor the evolving regulatory landscape.”
Being a blockchain-based form of finance, DeFi does not rely on central financial intermediaries since it operates transactions via automatic protocol mechanisms that are referred to as smart contracts. The sector recorded major growth in recent years, jumping from about $8 billion in total value last September to over $174 billion at the time of publication.
Coming in line with DeFi principles, decentralized exchanges (DEX)like Uniswap do not have a centralized team or person responsible for operating the protocol. The platform is supervised and operated automatically or by participation.
No, the SEC and others can't shut down Uniswap's or other DeFi smart contracts
But they can easily make it as difficult/illegal as transacting on the Dark Web for residents in their jurisdiction (at least)
As well as declare all governance tokens as securities
— Alistair Milne (@alistairmilne) September 3, 2021
According to Alistair Milne, the crypto investor, and entrepreneur, regulators cannot shut down DeFi smart contracts like Uniswap but might make DeFi transactions illegal in the same way as transacting on the dark web.