Regulators Investigate Crypto-Exchange Developer Uniswap Labs

[Woodie]

WASHINGTON—The Securities and Exchange Commission is investigating the startup behind one of the biggest cryptocurrency exchanges, as regulators probe further into parts of the digital-asset market that have resisted oversight, according to people familiar with the matter.

Regulators are examining Uniswap Labs, the main developer of the world’s largest decentralized exchange, called Uniswap, the people said. Enforcement attorneys are seeking information about how investors use Uniswap and how it is marketed, the people said.

A spokesman for Uniswap Labs said 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.” An SEC spokeswoman declined to comment, saying the agency doesn’t confirm or deny investigations.

Decentralized exchanges are hubs of a fast-growing crypto marketplace known as decentralized finance, or DeFi. The term DeFi encompasses a variety of projects that seek to automate traditional financial activities, such as trading or lending, using cryptocurrencies. Software developers write the computer code that powers the projects, which typically operate on the Internet as “protocols”—ways for distributed networks of computers to communicate with each other, without a central server running the program. The developers often say they no longer control the protocols, which could diminish their liability under securities laws.

SEC Chairman Gary Gensler has said DeFi projects aren’t immune from regulatory scrutiny. They may still be controlled by developers or middlemen that benefit from incentives such as trading fees and digital tokens that give holders governance rights over the program, he has said.

Read more https://www.wsj.com/articles/regulators-investigate-crypto-exchange-developer-uniswap-labs-11630666800


I don't like this route these guys are taking of probing a dex, honestly it's a witch hunt ! Are these guys trying to pin these guys for getting incentives from fees and there after the tax man comes after these guys...

[mindrust]

SEC Chairman Gary Gensler has said DeFi projects aren’t immune from regulatory scrutiny. They may still be controlled by developers or middlemen that benefit from incentives such as trading fees and digital tokens that give holders governance rights over the program, he has said.

That doesn't make any sense. If the devs can control the network, then it is not decentralized. If the network is decentralized then it cannot be regulated. Something is not right here and we will find about it soon.

Either the SEC will go full retard when they find about that it is impossible to regulate a decentralized system or we will find out that deFi wasn't really what it was advertised. (decentrazlied)

Soon.™

[sikke]

They can probe all they want.

But the fact of the matter is that they can't do anything to the DEX itself - it is decentralised and upheld by the community, not the developers.

Heck, what was the point of doing this? So that they can make sure the developers no longer undertake these projects in the future? There are millions of others who would take on this challenge.

[Darker45]

Your linked article won't be fully available if one doesn't sign in or subscribe.

Anyway, I think we could interpret this initiative by the SEC more as a way for them to learn and understand how things work with UniSwap and other decentralized exchanges than an effort to investigate the platform for a legal violation or any wrongdoing.

UniSwap has more than a billion in daily volume. And noting the statements of Chairman Gensler regarding DeFi in the past months, UniSwap's people should have already looked forward to the SEC knocking their door one day.

[bbc.reporter]

Pretend that you are a regulator observing the whole cryptospace. You witness scammers and frauds doing rugpulls, you witness scam ICOs with their development teams shilling their tokens and other pump and dumps. You see Uniswap, a project that is presently developing something, and declare that is the one to target. I shake my head.

[hugeblack]

I think that this type of currency is the one that SEC will start to monitor. After stablecoins, most of the decentralized finance is centralized, and therefore if they investigate UNISWAP, they may be able to control the currencies or at least impose taxes on them, just as happened with the hack of Polygon MATIC.

Unfortunately, they will be able to do so, so most of these networks are completely centralized.

[bbc.reporter]

@hugeblack. I disagree. Enforcement of the law and regulations will certainly be a problem unless the SEC can takedown smart contract platforms like Ethereum, Binance smart chain and Solana. The SEC might takedown the websites, however, they will only be pushing Defi farmers to be more creative and use privacy tools like TOR. This might create a setting where only the criminals have access to Defi.

[Bitcoin_Arena]

@hugeblack. I disagree. Enforcement of the law and regulations will certainly be a problem unless the SEC can takedown smart contract platforms like Ethereum, Binance smart chain and Solana. The SEC might takedown the websites, however, they will only be pushing Defi farmers to be more creative and use privacy tools like TOR. This might create a setting where only the criminals have access to Defi.

The reason those sites are booming right now is because of the User friendly interface that can be used by many people who are less technical. Should they decide to shut down the front end, then the unstoppable smart contracts we keep singing about become close to useless with no more volumes or liquidity, and the exchange or DeFi dies just like that.

Remember, Etherdelta whose creators were charged by SEC? I wonder what Etherdelta is up to right now

[FinneysTrueVision]

Most, if not all, decentralized exchanges are not actually decentralized. There are companies and investors behind these exchanges and they have a lot of control over these protocols. Uniswap Labs was able to delist certain tokens from their platform and their code is under a Business Source License. There are too many centralized aspects that I felt it was inevitable for regulators to eventually come after them.

[bbc.reporter]

@hugeblack. I disagree. Enforcement of the law and regulations will certainly be a problem unless the SEC can takedown smart contract platforms like Ethereum, Binance smart chain and Solana. The SEC might takedown the websites, however, they will only be pushing Defi farmers to be more creative and use privacy tools like TOR. This might create a setting where only the criminals have access to Defi.

The reason those sites are booming right now is because of the User friendly interface that can be used by many people who are less technical. Should they decide to shut down the front end, then the unstoppable smart contracts we keep singing about become close to useless with no more volumes or liquidity, and the exchange or DeFi dies just like that.

Remember, Etherdelta whose creators were charged by SEC? I wonder what Etherdelta is up to right now

I was not arguing about Uniswap being centralized or decentralized. There are arguments for both. However, I was thinking that why out of all the scams and rugpulls in the cryptospace, the SEC has decided to begin a crackdown on a project that is not scamming people?

[Darker45]

But the fact of the matter is that they can't do anything to the DEX itself - it is decentralised and upheld by the community, not the developers.

At the very least this is questionable, at most this is false. What is only guaranteed in a DEx is that it is an exchange. The D there which means decentralized may not be. There are factors which argue that UniSwap is not as decentralized as it may claim. We only need to look at what UniSwap Labs can do to the overall direction of the project to somehow get the idea that they have sufficient power to make changes outside the governance protocol.

To be fair, this might be the thing that the SEC wants to understand. So this is not really an investigation of a wrongdoing on the part of the platform. This is just to understand how things really work.