Will governments regulate AMMs like Uniswap?

[Abiky]

Despite claims of "Uniswap" being a decentralized AMM, the team is preventing some tokens from being traded on the platform. The smart contract industry is still widely unregulated, so it shouldn't be long enough before governments try to take a piece of the pie. I know that anything built using smart contracts is decentralized (depending on how it's coded, of course), but governments can easily regulate AMMs by making the creator or developer of the project accountable for his/her actions. Imagine governments (especially the US government) going after an AMM like Uniswap for listing "unregistered securities". It would greatly stifle innovation in the crypto/Blockchain space.

What are your thoughts? Will governments be able to successfully regulate AMMs like they did with ICOs? If not, why? How do you think governments will be able to tax income from liquidity pools? Your input will be greatly appreciated. Thank you

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[Bitcoin_Arena]

So long as someone can just wake up and add a line of code overnight without even going through the voting process by the community there by blocking traders from accessing tokens, be it on the frontend. Then the exchange ceases to be decentralized.

If SEC comes knocking, the same folks can add another line of code and bend the rules without thinking twice. Speaking of decentralized exchanges. Remember Etherdelta, a popular "decentralized exchange" whose last nail in the coffin came from SEC when the slapped charges on the owner?

[anu1908]

it is definitely possible, especially if the team/developer is known and the hosting is located on their countries. it's quite easy for government co charge the founder/dev with accusation such as running an unlicensed broker service etc.

[Abiky]

it is definitely possible, especially if the team/developer is known and the hosting is located on their countries. it's quite easy for government co charge the founder/dev with accusation such as running an unlicensed broker service etc.

That's easy to say if so-called "decentralized exchanges" are hosted on a central server and manipulated by their own creator. But for truly-decentralized exchanges, that's another story. How successful governments will be able to regulate AMMs will depend on how decentralized these platforms truly are. Developers are responsible of coding a decentralized exchange that lives up to its name. Despite claims of Uniswap being "decentralized", the team is censoring certain tokens from being traded on the platform due to regulatory concerns. This greatly defeats the whole purpose of crypto/Blockchain tech. If this keeps up, AMMs might become a "failed experiment" just like ICOs did some time ago. I hope that doesn't turn out to be the case, as decentralization emerges victorious in the long run. Just my thoughts

[asriloni]

What are your thoughts? Will governments be able to successfully regulate AMMs like they did with ICOs? If not, why? How do you think governments will be able to tax income from liquidity pools? Your input will be greatly appreciated. Thank you

The developers of AMM was hiding their identity and it's very easy for the government to regulate AMM. Did you remember what was happening with etherdelta's developer?

We know that how decentralized the etherdelta in the past and as long as the identity of the creator of AMM can be known easily and the government can push these developers to follow what already ordered by them.

it is definitely possible, especially if the team/developer is known and the hosting is located on their countries. it's quite easy for government co charge the founder/dev with accusation such as running an unlicensed broker service etc.

The hosting doesn't matter a lot in this case but, the government can sue the developers by running an illegal activity. This has been happening since a few years ago.
Idex was also become an example if the government can push dapp developers

that's why idex developers were deciding KYC as an obligation for its users

[mexite]

There is every possibility of government making future move to regulate DEXs. Take for instance IDEX which used to be popular before Uniswap came, at a point, it mandated users to register with an email, while users from the US are not allowed to use the platform, even though it's supposed to be a DEX.

[semobo]

Anyone can list a token or project in the decentralized exchange and if the creator of the platform is taking actions about which project should exist then its no more decentralized exchange.And I don't think government will regulate such things since its near to impossible so either they will let it be or prohibit the decentralized exchanges completely.

[hugeblack]

Most of the decentralized networks and platforms that claim to be for decentralized finance have proven their failure and that they are central at some point, and the last Hacker steals $600 million from Poly Network in biggest ever prove that.

Since it is centralized, it is easy to regulate by imposing restrictions on the owners of smart contracts, and therefore this is expected to happen, but it will be less severe and more efficient than the current methods of financing.

[Abiky]

The way most AMMs are run now, which as you point out and which most platforms are now beginning to prove are actually highly centralized (not just about Uni delisting but even about pancakeswap freezing and even NFT marketplace censoring and worse,,, Uni3 will be closed source) it proves there are people behind the AMMs pulling the strings.

If there are string pullers, then the US can get to them. That means they can get to you through id of your wallet!

It's easy enough to regulate something that has a single point of failure. Any platform with a tiny bit of centralization will be doomed in the long run. Let's face it, there's no AMM platform that's truly decentralized these days. Either they live on a centralized hosted server, or they've been coded in a way the creator can manipulate everything at will. Uniswap V3's closed source code, alongside censorship of tokens on the platform, tells us that the project is nothing more than a sham. People are foolish enough to believe it's decentralized simply because it "lives" on the Ethereum blockchain. But there's more to that than meets the eye. If no truly-decentralized AMM comes up in the future, governments will ultimately win the battle as they regulate trading platforms to their hearts' content. I hope decentralization prevails in the long run, fulfilling crypto/blockchain tech's purpose. Just my thoughts

[Bitcoin_Arena]

There is every possibility of government making future move to regulate DEXs. Take for instance IDEX which used to be popular before Uniswap came, at a point, it mandated users to register with an email, while users from the US are not allowed to use the platform, even though it's supposed to be a DEX.

Wait a minute. IDEX even went to an extent of restricting users? 

I haven't used the platform for ages. I think I stopped using it in early 2018. This goes to show that this so-called exchange running on smart contracts aren't actually decentralized. Very many novice traders are still being fooled.

I am yet to see a "decentralized exchange" that operates like Bisq. I am not saying Bisq is perfect

[Bitstar_coin]

This is a valid point you just raised, the government does have the power to go for the owners of this amm's platform and make them accountable for the activities going on in the platform, and can also impose regulations which they will be compel to adhere to or lose their business if they fail to comply, in the end, nothing is fully decentralize looking at it from this point of view, the government can influence the crypto space anytime they see fit whether centralize or decentralize.

[Abiky]

Wait a minute. IDEX even went to an extent of restricting users? 

I haven't used the platform for ages. I think I stopped using it in early 2018. This goes to show that this so-called exchange running on smart contracts aren't actually decentralized. Very many novice traders are still being fooled.

I am yet to see a "decentralized exchange" that operates like Bisq. I am not saying Bisq is perfect

Exactly. Just because an exchange lives on the Blockchain through smart contracts, doesn't mean it's decentralized. Everything will depend on how the exchange is coded by the developer. Most people aren't tech-savvy enough to dig deeper into an exchange's source code, so they have no choice but to believe what it's said to them. It's a pity since the vast majority of decentralized exchanges are not as decentralized as we would thought them to be. This greatly defeats the whole purpose of crypto/Blockchain tech.

Fortunately, there are a few decentralized exchanges that live up to their name. Bisq is not the only truly-decentralized exchange in the crypto/Blockchain space. Block DX is another alternative with a wide number of trading pairs to choose from. I consider this exchange to be the best decentralized exchange in the world. We also have atomic swaps which are a truly peer-to-peer way to exchange one cryptocurrency from another without any middleman.

As much as I love Uniswap, I have to admit that it's not completely decentralized. The team is already restricting some tokens to be listed on the platform, mainly because of regulatory concerns. Besides, the newest iteration of the project is closed source. This makes it easy for governments to regulate Uniswap to their hearts' content. If other platforms follow Uniswap's footsteps, then "De-Fi" will be doomed. I hope that doesn't turn out to be the case in the long run for the good of crypto/Blockchain tech. Just my thoughts

[Abiky]

Even if you do not admit it,,, it is not decentralized and it never was:) And if you think it is trying to be more and more decentralized,,, then remember what they want to do with Uniswap version 3, which it will make closed source. Restricting, closing source, well, are you in any doubt that Defi is just filled with hypocrisy and fake facts?

Developers are making it closed source in order to take out the competition. It's a huge mistake since crypto land is all about decentralization and freedom. The more variants (forks) of a project there are, the stronger Blockchain tech will be in the long run. Restricting access to the source code will only stifle the growth of the industry in general. This brings us a single point of failure crypto/Blockchain tech was meant to avoid in the first place. As long as centralization exists, it'll be easy enough for governments to enforce regulations at their own will. The vast majority or crypto projects only use the term "decentralization" in order to attract investors into them. It's just a catch phrase that's intended to fool newcomers into crypto. Most people don't care about decentralization anyways. If they did, they would've avoided centralized exchanges as much as possible. Only time will tell us the fate of AMMs as governments increase regulatory pressure. I hope they don't become a failure like ICOs did back in 2017. Just my thoughts