Will governments crack down on DEXs someday?

[Abiky]

With stricter regulations in the crypto industry, it's possible governments will begin cracking down on DEXs (Decentralized Exchanges). Especially those that are truly-decentralized without KYC checks. Regulators messed up crypto mixing services, and now they'll want to put DEXs in-check. All to force people to go through KYC and lose their privacy and freedom.

That makes me wonder, will DEXs face greater regulatory scrutiny over the long term? Because if they do, then people will have no choice but to use a CEX to buy/sell crypto. F2F (Face to Face) might be an option, although highly-risky. Because you don't know if the other end (party) is an undercover agent working for the government.

Thoughts?

[shinratensei_]

They can't crack on DEX because it's DEX, the logic lives on the decentralized blockchain. Even if government insist, they could only crackdown the front end, but user can interact with the contract directly.
In my opinion as long as those DEX doesn't fly too close to the sun, they will be fine though that kind of attempt to force government to regulate DEX is already being done, like the recent CME report to CFTC about Hyperliquid.

The other attempt they might do if they failed to crack down on DEX is to taint any address connected to the DEX.

[Charles-Tim]

Since I have been on this forum, I have seen regulators went after some exchanges and mixers that had campaigns on this forum, which means there would be more that they went after. You will see the exchange later saying they are winding down because of regulatory pressure. But there are more no KYC and decentralized exchanges that later surfaced. The chance the government will be able to completely dismantle all the exchanges is significantly low and seem not possible just like mixers.

[FinneysTrueVision]

Banning non-custodial token swaps would be a very extreme measure. Trying to ban DEXs would end up having the same effect as the sanctions on Tornado Cash, where despite having their developers arrested, the protocol is still running fine and many people use it.

Regulation in Europe has gotten very strict, but it mostly affects users' ability to offramp into fiat. Using privacy coins has also become harder, but it is still possible to acquire them. Any protocol that is sufficiently decentralized, they will not be able to suppress entirely.

[asriloni]

Dex can't be shutdown because it's executing via smartcontract. The best example is that how tornado cash is still exist despite the fact its founder and team behind it already arrested. This proves that what government can do to censorship the disallowed dex via blocking access to it.

This is the reason dex can't be crackdown. As long as the blockchain it's still exist. Dex still operates.

[MAAManda]

We do not know if DEXs will be shut down by the government at some point in the future. However, considering the actions taken against mixing services, the possibility of a crackdown on DEXs certainly exists. That will certainly take the industry by surprise, especially given that DEXs are currently at their peak, driven by platforms like Hyperliquid (HYPE).

[crwth]

Just like what the others have said, it's unlikely because it's decentralized and it's on public blockchains, and the protocols continue to operate.

What needs to be addressed here, IMO, is how DEXs would be legally classified and whether the operators or the developers would take the blame? It's quite confusing and still a gray area.

It will always boil down to regulations.  

[coin-investor]

That makes me wonder, will DEXs face greater regulatory scrutiny over the long term? Because if they do, then people will have no choice but to use a CEX to buy/sell crypto. F2F (Face to Face) might be an option, although highly-risky. Because you don't know if the other end (party) is an undercover agent working for the government.

The recent flood-control scandal in our country could have prompted our authorities to crack down on DEXs for money laundering, but they chose not to because it's a huge task that requires significant resources. They can only ban global CEXs, but DEXs here in our country are still available for traders to transact on. We just never know if the government will try to do that in the future, so it can impose its power on traders and investors.

[o48o]

With stricter regulations in the crypto industry, it's possible governments will begin cracking down on DEXs (Decentralized Exchanges). Especially those that are truly-decentralized without KYC checks. Regulators messed up crypto mixing services, and now they'll want to put DEXs in-check. All to force people to go through KYC and lose their privacy and freedom.

That makes me wonder, will DEXs face greater regulatory scrutiny over the long term? Because if they do, then people will have no choice but to use a CEX to buy/sell crypto. F2F (Face to Face) might be an option, although highly-risky. Because you don't know if the other end (party) is an undercover agent working for the government.

Thoughts?

Crack down by imposing regulations? They have already done that in some level by flagging stolen money. I don't think they would need KYC, as long as they aren't fiat ramps. And if they are allowing it, they are also legally obligated to KYC their customers in most regions.

But why would it "force" people to use CEXes when CEXes actually are those fiat ramps that need to kyc their customers?

Risks with F2F that are more plausible are that you might be connecting your wallets to criminal activity. Or that  you might be robbed when customer just decides they can keep your money and cryptos. They wlll also see your face and know you are holding crypto in the future. I doubt that undercover agents would be interested, unless you are under investigation already, as in most cases, it's not illegal to sell money f2f.

[ImGenius]

-snip-

Government maybe can set regulations in some Dex which are popular and running right now but they can't do anything to those Dex that made after the regulation. Why we use Dex when we need to verify kyc. Instead someone may make something that works like dex and user can use efficiently while government can't do anything about it. Although they can block website but user can still use smart contracts.. government can't control smart contracts