What if DEXs are banned in the future?

[Abiky]

Governments seem to come up with something new to prevent crypto from achieving its full potential. From cracking down on mixers and enforcing KYC across centralized exchanges, they aim keep crypto under their control. The only things they can't manipulate or enforce the rule of law (aside from blockchain networks themselves) are decentralized exchanges.

But what if governments decide to hunt down the developers of DEXs? Or what if they estalish a law where developing a non-compliant DEX (no-KYC) can be subject to prosecution (jail time or fines)? If that happens, the industry will be doomed. With a US senator drafting the "Digital Currency Anti-Money Laundering Act of 2023", anything's possible.

What do you think will happen if DEXs are "banned" in the future? Will they die? Or will they still survive (despite the fact that most people will avoid them to prevent jail time or being fined)?

Your input will be greatly appreciated. Thank you very much.

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[kentrolla]

In past two months we have seen it all, be it hounding centralized exchanges or crackdown on mixers which has led to banning mixer campaigns in this forum from 1st January as a precautionary measure. But, when it comes to decentralized exchanges the government will have limited scope to target the DEX since they don't control it like they do for centralized exchanges with KYC and all. But if they start targeting people associated with DEX then I would say we might see the real decentralization wherein everyone should go anonymous like Satoshi Nakamoto.

IMO they cannot do much with DEX.

[jacafbiz]

With the level of know in the space now, there is no way government can totally ban Dexes, you can fork the protocol and start your own exchange, Dexes are more like P2P trade. I think the fear people have with these governments ban this and that should be alleviated with the recent change of tunes from different government all over the world, what they can do is to find a way to control it, ban as not really work, especially for things with huge demand like drug, people will find a way round it.

[electronicash]

what they can do is turn the DEX into CEX so it can still operate and will be legal in the country where it resides. i agree though that governments are doing their thing to finally get a hold of those platforms and i think eventually they can control the crypto industry. DEX are full of data, they will make laws to drive DEX out. but not baan them.

DEXes are not immune to regulation and governments can easily take control of those DEX if they really will forcibly do it. 

[jrrsparkles]

What do you think will happen if DEXs are "banned" in the future? Will they die? Or will they still survive (despite the fact that most people will avoid them to prevent jail time or being fined)?

Governments are already on to the DEX too but it's not possible to use the word ban but they can try every possible way to make them stay away from the users and current DEXes are not completely decentralized since they have a single point of failure so they can be regulated, manipulated or banned too but in future if we tend to embrace the true DEXs then they can't ever be banned.

[batang_bitcoin]

IMHO, they will still survive regardless of what laws these senators or lawmakers from the US make. The world isn't just all about US and there are countries that don't rely on their policies with US' sanctions and laws and that's why it won't matter to some countries and whoever makes and develops these DEXes are pretty aware of those laws. They will continue to exist and something terrible will be the reason for them to cease like having no volume and liquidity or a massive hack.

[bluebit25]

I don't think the imposition is always enforced, and with DEX it would be a joke if some side wanted to ban this , I don't think there is a convincing enough reason for the issue to be considered the original essence of the blockchain field - its decentralization.

But I can throw out some ideas about them banning it by arresting the DEX operators, and doing something to make it stop working. However, in this crypto space, we have a lot of decentralization, it's like someone picking a flower in a forest of flowers, so this problem is not scary, but more about crypto is increasingly accepted, supporting development in a harmonious way rather than in a negative direction.

[Mate2237]

Even the Blockchain of Bitcoin is controlled, because the congestion that is happening right now is not an ordinary thing. From the way I am seeing things Bitcoin is no longer decentralized because of the ordinals. If Bitcoin Blockchain was alone then how come ordinals sneak into the system and make it congested. And because of the high transaction fee many people their fund or coins are now stuck in their wallets. And really the way the government is trying all means to control Bitcoin is getting obvious day by day and the developers of Bitcoin are not saying or doing anything to prevent that. Though the government is using allegations to be some of the Bitcoin clients.

Like mixer is client to Bitcoin and they have been banned from the Bitcoin forum which is wrong and now they are working on an altcoins forum which is not their Forum and promoting another forum for them. Well I don't think DEX can be banned by the government unless the ones that are not in the real DEX.

[Marvelman]

Decentralized exchanges pose a unique challenge for government regulation due to their decentralized structure.  Unlike centralized exchanges with clear leadership, DEXs have no central point of control.  This dispersion makes them almost impossible to monitor or restrict and 

any attempt to crack down faces difficulties.  Governments must first even identify all active DEXs across jurisdictions – in itself a herculean task given the ease of creating new ones.  Then they have to enforce bans on entities that by definition, cross borders and have no fixed address.  It's like playing whack-a-mole across the entire world wide web.

[rhomelmabini]

But what if governments decide to hunt down the developers of DEXs? Or what if they estalish a law where developing a non-compliant DEX (no-KYC) can be subject to prosecution (jail time or fines)? If that happens, the industry will be doomed. With a US senator drafting the "Digital Currency Anti-Money Laundering Act of 2023", anything's possible.

What do you think will happen if DEXs are "banned" in the future? Will they die? Or will they still survive (despite the fact that most people will avoid them to prevent jail time or being fined)?

Your input will be greatly appreciated. Thank you very much.

I don't think they should do that or else the community will surely enraged, they probably will get some cut or enforce a regulation on these DEXs. I wouldn't think it would lead to a ban on all DEXs but probably a few will stay. If they are banned surely they'll die, the government just don't want something innovative that is flourishing that they couldn't control at all.

[JeromeTash]

I think we have already seen fines and pressure being mounted on such exchanges. A good example was Etherdelta where the owners were fined, and then we had IDEX starting to ask for KYC from users citing regulatory pressure.

We have also seen some so-called decentralized platforms censoring transactions, so yes, bans and sanctions are very possible for DEXs as well. A true DEX like Bisq would be hard to censor.

[Kelward]

In past two months we have seen it all, be it hounding centralized exchanges or crackdown on mixers which has led to banning mixer campaigns in this forum from 1st January as a precautionary measure. But, when it comes to decentralized exchanges the government will have limited scope to target the DEX since they don't control it like they do for centralized exchanges with KYC and all. But if they start targeting people associated with DEX then I would say we might see the real decentralization wherein everyone should go anonymous like Satoshi Nakamoto.

IMO they cannot do much with DEX.

The worry is that governments don't like DEX in anyway because they don't control it, something in their domain that concerns finance and there's no how that they can monitor the currency flow. Looking from the governments perspectives I think that it can be for security reasons that can make them to consider ban of DEX, probably money laundering for illegal activities in respective countries.

If DEX ban is achieved then the purpose of privacy in Bitcoin will be defeated, it'll no longer be anonymous like Satoshi Nakamoto, envisioned, it'll end up just like another currency in digital form. I sincerely hope that this does not happen because decentralization is the core of Bitcoin, without it the privacy that it's holders enjoy will be lost.

[rat4]

What do you think will happen if DEXs are "banned" in the future? Will they die? Or will they still survive (despite the fact that most people will avoid them to prevent jail time or being fined)?

Various privacy-enabled DEXs are possible. Government won't know what citizens do with crypto while there's the right to remain silent.

[pakhitheboss]

What do you think will happen if DEXs are "banned" in the future? Will they die? Or will they still survive (despite the fact that most people will avoid them to prevent jail time or being fined)?

Your input will be greatly appreciated. Thank you very much.

Why do you think the government would try to ban a DEX, they have tried to ban crypto trading earlier, and the result was not what the government expected. Recently Nigeria has come out of the crypto ban and in the past India went through the same phase.

Why is it impossible to ban a DEX? The simple reason being they as in the DEX are not available in the real world. An outright ban is not possible because DEX does not have a central entity or a target server. To shut them down a government would need to shut the internet, it can only happen in a country where democracy does not exist.

I don't think that any government can come up with a ban on DEX, what I understand is that they might come up with regulations. That being said they might force individual wallet holders to pass KYC using the data that these DEX hold. They might force a DEX to strictly follow their regulations. I do not know how they would do it but I am certain it is not that easy to ban them.

[GlacierBIT]

The struggle between regulators and decentralized exchanges (DEX) is very tricky, but the end is not coming soon, the situation should not change next year. This complex process of prohibition will be accompanied by small attempts by the government to change the legal framework. The lack of a central authority or server makes it difficult for governments to shut them down completely.

[Yogee]

It's possible with the current build of most "decentralized" exchanges but it will probably become more resource intensive for the Government to implement such policies. They may want to just focus on the various centralized fiat-payment gateways to combat anti-money laundering since it's where most cryptocurrencies end up anyway.

[avikz]

Decentralized exchanges will eventually be banned by all governments. We have started seeing this actions from the United States and slowly other allies of US will start following the same. So there is no question whether the decentralized exchanges will be banned or not. We need to consider that it will be banned and all crypto users will have to follow usual KYC guidelines for using centralised exchanges.

I think it is better to be mentally prepared for the inevitable. Because I do not see governments allowing unidentified transactions in cryptocurrency ever in the future. They have slowly started implementing it and the ban on crypto mixers is just the beginning of it.

[goldkingcoiner]

I can confidently claim that there is no such thing as a single point of control in a DEX. How do you think anyone, even someone as powerful as the government, can control, ban or regulate that? The decentralized nature of these exchanges makes them technically impossible to be banned.

So do I think that any DEX is going to be banned in the future? No. It is extremely unlikely. And the only reason why I say unlikely is because I do not know what kind of technology the future will bring us. We might live in a dystopian future, in a world where everyone is monitored all the time. That might break decentralized technology.

However there do exists exchanges which claim to be DEX but are not. Those can be banned.

[tsaroz]

Governments seem to come up with something new to prevent crypto from achieving its full potential. From cracking down on mixers and enforcing KYC across centralized exchanges, they aim keep crypto under their control. The only things they can't manipulate or enforce the rule of law (aside from blockchain networks themselves) are decentralized exchanges.

But what if governments decide to hunt down the developers of DEXs? Or what if they estalish a law where developing a non-compliant DEX (no-KYC) can be subject to prosecution (jail time or fines)? If that happens, the industry will be doomed. With a US senator drafting the "Digital Currency Anti-Money Laundering Act of 2023", anything's possible.

What do you think will happen if DEXs are "banned" in the future? Will they die? Or will they still survive (despite the fact that most people will avoid them to prevent jail time or being fined)?

Your input will be greatly appreciated. Thank you very much.

As people have already explained, it would be difficult to block DEX. They can ban the IPs and domains but there could be many of those proxies. Another serious way of stopping it would be the criminalizing of using of DEX and arresting people for using it. That would certainly stop most people.
If initiated and promoted by the US, they could implement on most of the world. I don't think that's a likely scenario but you never know considering how low the authorities can go for holding on to their power.

[Abiky]

what they can do is turn the DEX into CEX so it can still operate and will be legal in the country where it resides. i agree though that governments are doing their thing to finally get a hold of those platforms and i think eventually they can control the crypto industry. DEX are full of data, they will make laws to drive DEX out. but not baan them.

DEXes are not immune to regulation and governments can easily take control of those DEX if they really will forcibly do it. 

Most DEXs aren't truly-decentralized, so it's easy enough to shut them down if they don't comply with KYC/AML laws. Developers tied to semi-decentralized exchanges will have no choice but to integrate KYC to avoid prosecution from the government. Only a small minority of DEXs (those that are truly-decentralized) would be completely "impenetrable". If they are made "illegal", DEX liquidity will decline at a very fast pace. That's because most people will avoid them out of fear from the government.

At least we know DEXs won't be going anywhere thanks to their open source nature. What stopping anyone from creating a fork anonymously? Trades will happen under the radar of mainstream governments. As long as there's one truly-decentralized exchange alive, we should have nothing to worry about.