What if DEXs are banned in the future?

[Sayeds56]

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.

You are absolutely right that it is very challenging for governments to ban DEXs because they have no centralized authority to control their operations. It is worth noting that they are not immune to government regulatory or legal action, however, It will be difficult for government to ban DEXs as they operate on open source block chain technology, and cryptocurrencies can be traded peer to peer even in the absence of formalized trading platforms.

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[Sophokles]

Bitcoin is illegal in many regions of the world so how do people from those region make investments in bitcoin? If government ban dex then people will not be able to use them legally and some people will not use them to avoid any trouble but most of the users will try to look for any alternative way to go over the system. Government can pass laws but if they are against the demands of the community, then people will figure out their own way to bypass the law so that they can still use the product if they benefit from it.

[Belarge]

Bitcoin is illegal in many regions of the world so how do people from those region make investments in bitcoin? If government ban dex then people will not be able to use them legally and some people will not use them to avoid any trouble but most of the users will try to look for any alternative way to go over the system. Government can pass laws but if they are against the demands of the community, then people will figure out their own way to bypass the law so that they can still use the product if they benefit from it.

Bitcoin can be legal in some countries and not all because most of these countries have perceived bitcoin to be the only threat that will drive away their good chances.nThe government is powerful and authorized to permit any project they pleases. The government will poses threats and ban on this modern day projects because they found most of them to become threating to their own revenue and development, none of these citizens still fancy the day-to-day activities of the government, rather they will look for another means to check the possibility of scouting out another means to triggered their activities without the knowledge of the government.

[o48o]

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.

It might go so far, as it seems most dexes are in core very centralized, but more plausible scenario is that they need to blacklist addresses to stay alive. Uniswap has done this and i am guessing other relevant DeXes are required to do this also.

I am guessing that some dexes will just get more automated and decentralized enough that they can't be shut down. This would leave most of the AML law responsibility to centralized financial services that are required to freeze money from blacklisted accounts or money from mixers etc.

[oktana]

What kind of law will it be that you asked DEX to get user KYC? I am on the fence for this conversation because I understand both parties… the government wants to know what’s going on, who is transacting the money, etc because people launder money. The decentralized system wants to give and respect user anonymity. So, what the government wants is understandable but making such law will just mess up crypto (to an extent).

[Samlucky O]

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.

No doubt government has been a great threat to crypto currencies just as you said. from baning of mixers and enforcing people on kyc but i dont think its possible to enforce a law that will affect Dex. Because Dex is DEX while CEX is CEX. Decentralized exchange (DEX) is an exchange of crypto that store and send coin from wallet to wallets while Centralised exchange (Cex) is an exchange that store and trade crypto currencies through p2p with the use of kyc. And for one to trade your coin for Fiat you would definately used a Centralized exchange for p2p. So since it's almost useless to fight the impossible i think it's only CEX they will target. Because whomsoever that did money laundering with DEX will definitely need CEX for Fiat exchange. That is why they can only attack CEX.

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)?

Nothing will happen if Dex is ban. There is no way both of them DEX and CEX will have issues at a time. In as much as government is kicking against crypto currency, I think they too also invest behind Close doors and act as if they don invest publicly. But one thing you should understand is that what ever have an advantage also have a disadvantage. So baning DEX will also affect those government entities that did money laundering and invested in crypto. thereby they will see it as needles to do such because they are also a pertner In crime. That is how I see it in my own way.

[Abiky]

It might go so far, as it seems most dexes are in core very centralized, but more plausible scenario is that they need to blacklist addresses to stay alive. Uniswap has done this and i am guessing other relevant DeXes are required to do this also.

I am guessing that some dexes will just get more automated and decentralized enough that they can't be shut down. This would leave most of the AML law responsibility to centralized financial services that are required to freeze money from blacklisted accounts or money from mixers etc.

Blacklisting address, eh? So much for censorship-resistance. I wouldn't call Uniswap a "decentralized exchange", especially when it's prone to censorship. Not only that, but the source code of the project is limited (open source after a few years of each iteration). I miss the old days when we had truly-decentralized exchanges such as EtherDelta and ForkDelta. Ever since Uniswap came into fold, things haven't been the same. Even though there's still a small number of truly-decentralized exchanges, the market is largely dominated by both semi-centralized and centralized players. This is harmful for the crypto industry in the long run. It'll be extremely-easy to enforce regulations at will.

If only developers stopped thinking the money and started caring about decentralization/censorship-resistance, crypto would've achieved its full potential by now. Wasn't the whole point of Bitcoin to eliminate the middleman? I wouldn't be surprised if KYC-compliant "DEXs" emerge in the long run. Most people won't care about giving away their personal info as long as they get convenience in return. It will be a dark future for crypto/Blockchain tech, unfortunately. 

[oktana]

It might go so far, as it seems most dexes are in core very centralized, but more plausible scenario is that they need to blacklist addresses to stay alive. Uniswap has done this and i am guessing other relevant DeXes are required to do this also.

I am guessing that some dexes will just get more automated and decentralized enough that they can't be shut down. This would leave most of the AML law responsibility to centralized financial services that are required to freeze money from blacklisted accounts or money from mixers etc.

Blacklisting address, eh? So much for censorship-resistance. I wouldn't call Uniswap a "decentralized exchange", especially when it's prone to censorship. Not only that, but the source code of the project is limited (open source after a few years of each iteration). I miss the old days when we had truly-decentralized exchanges such as EtherDelta and ForkDelta. Ever since Uniswap came into fold, things haven't been the same. Even though there's still a small number of truly-decentralized exchanges, the market is largely dominated by both semi-centralized and centralized players. This is harmful for the crypto industry in the long run. It'll be extremely-easy to enforce regulations at will.

I’d appreciate if you explain what you mean about you not calling Uniswap a decentralized exchange. I don’t understand how you mean that they are prone to censorship.

If only developers stopped thinking the money and started caring about decentralization/censorship-resistance, crypto would've achieved its full potential by now. Wasn't the whole point of Bitcoin to eliminate the middleman? I wouldn't be surprised if KYC-compliant "DEXs" emerge in the long run. Most people won't care about giving away their personal info as long as they get convenience in return. It will be a dark future for crypto/Blockchain tech, unfortunately. 

Unfortunately in this context, everyone doesn’t think the same. Satoshi did his part and created what the world was lacking, we’ve seen different cryptocurrencies that are the exact opposite and work against his purpose of creating Bitcoin. I wouldn’t be surprised if I saw switch DEX too, it will be so ironic.

[Abiky]

I’d appreciate if you explain what you mean about you not calling Uniswap a decentralized exchange. I don’t understand how you mean that they are prone to censorship.

If you really want to know, I'd suggest you read the following articles:

https://news.bitcoin.com/uniswap-censors-253-crypto-addresses-blacklisted-for-crime-sanction-associations/

https://thedefiant.io/decentralized-or-not-uniswap

From censoring addresses to hiding tokens, Uniswap fails to be a truly-decentralized and censorship-resistant exchange for the unbanked. I know the censorship case was related to sanctioned addresses by the US government. But what makes you think they won't do the same with an average person in the future? If some government flags you as a "terrorist" or a criminal, you will be unable to swap your tokens on Uniswap.

I believe Web 3.0 should be neutral for true decentralization + censorship-resistance. Unfortunately, there's only a small number exchanges that adhere to crypto's original principles. Regulatory pressure is increasing each day, so I wouldn't be surprised if DEXs are banned in the future.

[Asiska02]

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 just can’t imagine that and it looks almost impossible to happen now, so I can think much of a way out if they are completely banned in the future. We know that the DEXs are a big deal on the government’s side and they’ve been devising means that they can clamp it down and have it operate like how CEXs does now. The government can’t be underrated and they can do whatsoever they wish, some just have to take time before it’s finally achievable. I am no scared of them being banned in the future even though I know it won’t be a nice thing to the crypto community, in spite of all this, I know bitcoin will still prevails.

[deathcode]

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)?

maybe the DEX system will switch to like CEX. if they want to survive with their business and not lose customers, of course, they have to adapt to government regulations.
This is indeed unpleasant, but what we fear may also happen in the future.
if there was a problem that entangled an entire centralized exchange, it would certainly annoy most users. if exchanges stick with what they are doing, still users will probably switch and leave CEX.

[jrrsparkles]

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.

This isn't just about the US government alone, at least they don't like the privacy but some governments don't even want the bitcoin to exist and CHina and Russia are the names that came into mind who will be in the opposite of any idealogy but it comes to crypto the condition of the two countries are worse too.

[Argoo]

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.

Governments may in the future be able to control the operation of decentralized exchanges, and they will also be able to monitor and control their work and even suspend transactions and seize accounts. Any decentralized exchange is registered in any state. And this state may well influence its work. If decisions are made at the level of the G20 countries, then most states will implement this decision. It is possible that some states will not have much influence on decentralized exchanges and will create something similar to offshore zones. This may work for a while. But it is already important that cryptocurrency is not prohibited and is under moderate control of states.

[libert19]

DEXes run on smart contracts, and these smart contracts live on blockchain. So, the only way government can take DEXes down is by destroying the blockchain itself. This might be easy to do with centralized blockchains, but much harder with Ethereum and such.

Other thing is, they can force close UIs on which these smart contract can be interacted on but crypto community is filled with enough geniouses who can conjure one up outta nowhere for public to use. Governments bans that one, and other one pops up.

If it's mere UI access ban/block for particular region, VPNs/Proxies are enough to get around that.

Take an example of Uniswap, there are telegram bots which allow you to trade without accessing Uniswap frontend like Mizar Trading Bot [1], other is using scripts, have a look at this [2].

I feel if governments try to ban DEXes, it will be a rabbit hole that they will never find solution for.


[1] Mizar Telegram Bot

[2] How to Swap Tokens on Uniswap with Ethers.js

If you gonna use any telegram bots, advisable to use new wallet than importing your main wallet.

[Abiky]

DEXes run on smart contracts, and these smart contracts live on blockchain. So, the only way government can take DEXes down is by destroying the blockchain itself. This might be easy to do with centralized blockchains, but much harder with Ethereum and such.

Other thing is, they can force close UIs on which these smart contract can be interacted on but crypto community is filled with enough geniouses who can conjure one up outta nowhere for public to use. Governments bans that one, and other one pops up.

If it's mere UI access ban/block for particular region, VPNs/Proxies are enough to get around that.

Take an example of Uniswap, there are telegram bots which allow you to trade without accessing Uniswap frontend like Mizar Trading Bot [1], other is using scripts, have a look at this [2].

I feel if governments try to ban DEXes, it will be a rabbit hole that they will never find solution for.


[1] Mizar Telegram Bot

[2] How to Swap Tokens on Uniswap with Ethers.js

If you gonna use any telegram bots, advisable to use new wallet than importing your main wallet.

That's the beauty of decentralization. You can still use a "banned" smart contract/dApp as long as the underlying Blockchain is alive and running. I've read that it's possible to interface with smart contract code through a CLI (usually a node daemon like Geth). But it's a little complicated for people without any technical background/knowledge. I think it's best to create a front-end interface hosted on a decentralized CDN or P2P network using a decentralized TLD. Something like IPFS + ENS would do the trick.

Governments are going to have a hard time trying to shut down a DEX running on censorship-resistant infrastructure. Unfortunately, developers are too lazy to make this happen. Most of them don't care about decentralization/censorship-resistance as long as their pockets are filled with money. At least, everything is open source. Maybe someday our dreams of true decentralization + censorship-resistance will come true?

[moneystery]

what is the reason the government wants to ban dex? is it because they don't enforce kyc and don't comply with regulations that it needs to be closed? if so, they need extra energy to track down these dex platforms, which is actually pointless, because when dex is banned by the government it will not make developers give up and not want to develop the platform anymore, instead developers will come up again with new ways to trick the government and it's quite easy for them to do that.

[fapar]

They can only restrict access to the DEX website. Because by its nature, DEX is a set of smart contracts. Of course, they can influence the developers of a particular DEX, if their jurisdiction allows it. You can always use a VPN and access the DEX website. But any DEX will strive to increase the number of its clients and thus can meet certain government/regulatory requirements.

[oktana]

I’d appreciate if you explain what you mean about you not calling Uniswap a decentralized exchange. I don’t understand how you mean that they are prone to censorship.

If you really want to know, I'd suggest you read the following articles:

https://news.bitcoin.com/uniswap-censors-253-crypto-addresses-blacklisted-for-crime-sanction-associations/

https://thedefiant.io/decentralized-or-not-uniswap

From censoring addresses to hiding tokens, Uniswap fails to be a truly-decentralized and censorship-resistant exchange for the unbanked. I know the censorship case was related to sanctioned addresses by the US government. But what makes you think they won't do the same with an average person in the future? If some government flags you as a "terrorist" or a criminal, you will be unable to swap your tokens on Uniswap.

I believe Web 3.0 should be neutral for true decentralization + censorship-resistance. Unfortunately, there's only a small number exchanges that adhere to crypto's original principles. Regulatory pressure is increasing each day, so I wouldn't be surprised if DEXs are banned in the future.

Wow. I never heard of this. But isn’t it because they were under the pressure of doing it. I’m not saying that it should give room for the act but it’s definitely from the fact that it’s the government. And maybe who knows what action would have been taken if they did nothing about it. I saw where they speak of fraud/hacks, but then banning the addresses does not actually stop them. Well, this is one of the reason why DEX is better than CEX. Innocent people were affected (from what I read), if it were CEX, they’ll so block everything. But with uniswap, you just can’t transaction but the fund is yours anyways. And someone was also saying that it’s just a front end thing, so technically it’s possible to bypass it if you communicate to the smart contract directly (not through Uniswap website).

[o48o]

Blacklisting address, eh? So much for censorship-resistance. I wouldn't call Uniswap a "decentralized exchange", especially when it's prone to censorship. Not only that, but the source code of the project is limited (open source after a few years of each iteration). I miss the old days when we had truly-decentralized exchanges such as EtherDelta and ForkDelta. Ever since Uniswap came into fold, things haven't been the same. Even though there's still a small number of truly-decentralized exchanges, the market is largely dominated by both semi-centralized and centralized players. This is harmful for the crypto industry in the long run. It'll be extremely-easy to enforce regulations at will.

If only developers stopped thinking the money and started caring about decentralization/censorship-resistance, crypto would've achieved its full potential by now. Wasn't the whole point of Bitcoin to eliminate the middleman? I wouldn't be surprised if KYC-compliant "DEXs" emerge in the long run. Most people won't care about giving away their personal info as long as they get convenience in return. It will be a dark future for crypto/Blockchain tech, unfortunately. 

Good point, i guess ether delta more decentralized in a way. It got sold though.

And then again Etherdelta and ForkDelta had their own issues, which make modern dexes look so easy and safe. I made some money by just grabbing stupid buy and sell orders, as liquidity was working quite differently and we had to fill every order seperately. If we didn't lose on the gas war on that. My friends weren't in crypto at the time so luckily i didn't have to explain that mess to anyone.

[sunsilk]

what is the reason the government wants to ban dex? is it because they don't enforce kyc and don't comply with regulations that it needs to be closed? if so, they need extra energy to track down these dex platforms, which is actually pointless, because when dex is banned by the government it will not make developers give up and not want to develop the platform anymore, instead developers will come up again with new ways to trick the government and it's quite easy for them to do that.

I hate to admit it but that's it. A country that has no benefit over a service that runs on their jurisdiction will have no doubt will ban a service like a dex.

They can ban it so that their citizens won't use it but they can't close or stop its operation. They just can simply ban the website from the IP of theirs.

It is also happening in centralized exchanges where countries are banning the likes of Binance because they are unregistered.