Will governments crack down on DEXs someday?

[pooya87]

It looks like we are heading toward that direction specially in places where the governments are addicted to surveillance and control and are spending millions of days to mine people's data in places like NSA and others...

The only ones that are going to be fine are the centralized exchanges that refer to themselves as decentralized like the one Binance had
The first ones to go are going to be the ones that have some reliance on centralization, like have a centralized server the traders need to connect to or pay the fees to in order to be able to trade.
The last ones that would go are the truly decentralized ones but the  devs behind them will be the primary target not the platform. It could be some malicious hostile takeover or simply shutting them down and deleting their code from the internet (as much as they can) and threatening users from using them with prison time or hefty fines.

[MAAManda]

Some DEXs in the past have already shut down due to government and regulatory issues; it’s no longer something new. It's a matter of anytime they consider one DEX to be conducting a high volume of transactions, which, to some extent, they can consider a threat, they will come after it, in the same way some mixers are still existing and will continue to exist until the government makes them their target and forms an excuse to attack them.

IDK if I've missed some important industry news, but I have never heard of a single DEX being forcibly shut down by the government or regulators. Recently, Loopring's DEX shut down, this was not due to government or regulatory action, but rather low user adoption rates. To verify it, you can read news about it here: https://pluang.com/en/news-feed/loopring-tutup-dex-adopsi-zk-rollup-gagal

Back to the topic of the DEX shut down by the government, if you have anything to substantiate that, feel free to provide it, otherwise you're just spouting bullsh*t.

[OmegaStarScream]

Entirely possible, I see these as the two paths to be followed:

- Punish the builders and developers behind those projects (especially those who don't comply). Like they did with privacy focused tools such as Tornado cash and Samurai wallet.

- If the founders are no longer associated with these platforms... another way to do it would be to punish the users by forcing CEXes to block addresses and transactions from those dexes.

Although it is worth mentioning also that with many centralized projects that can freeze your funds (USDT, USDC, or entire chains like we've seen Arbitrum somehow managed to recover hacked funds, etc) a complete crackdown on DEXes may not even be that necessarily.

[Odohu]

My understanding is that government have problems with anything that is privacy oriented, so I will not be surprised if they go after DEX someday because they do not collect KYC data of their users. Most of the funds stolen through hacks are passed through DEX together with mixers and coinjoin, so I think they are in the same category and in the wrong side of government books. Using DEX may not pose a threat to the users but the operators might be targeted through shutting down and other forms of crackdowns.

[Ahli38]

Some DEXs in the past have already shut down due to government and regulatory issues; it’s no longer something new. It's a matter of anytime they consider one DEX to be conducting a high volume of transactions, which, to some extent, they can consider a threat, they will come after it, in the same way some mixers are still existing and will continue to exist until the government makes them their target and forms an excuse to attack them.

IDK if I've missed some important industry news, but I have never heard of a single DEX being forcibly shut down by the government or regulators. Recently, Loopring's DEX shut down, this was not due to government or regulatory action, but rather low user adoption rates. To verify it, you can read news about it here: https://pluang.com/en/news-feed/loopring-tutup-dex-adopsi-zk-rollup-gagal

Back to the topic of the DEX shut down by the government, if you have anything to substantiate that, feel free to provide it, otherwise you're just spouting bullsh*t.

Yes, that’s right. I’ve also never heard of a decentralized exchange being shut down by the government. And so far many DEXs have closed simply due to internal issues. Loopring DEX closed this year due to adoption issues and technical limitations. And last year the DEX Bunni shut down permanently after an incident forced them to close because they were unable to cover their operating costs (Source). So I personally believe that no DEX has yet been forced to close by regulators. But it’s still possible that it could happen in the future by considering that anything can happen for one reason or even another.

[justdimin]

My understanding is that government have problems with anything that is privacy oriented, so I will not be surprised if they go after DEX someday because they do not collect KYC data of their users. Most of the funds stolen through hacks are passed through DEX together with mixers and coinjoin, so I think they are in the same category and in the wrong side of government books. Using DEX may not pose a threat to the users but the operators might be targeted through shutting down and other forms of crackdowns.

They always do, and I can't really blame them for it. Like when the privacy coins got banned, did you really got shocked about it? Think about it for a moment, we are talking about something that allows you to hide your transactions from the government. You may have very good reasons for it, even just saying you want to evade taxes, which almost everyone does.

But you also need to remember, that also means bad people are using it as well. So when it comes to DEX, same logic applies, YOU may have good reasons, but bad people do exists out there and can use it.

[nelson4lov]

My understanding is that government have problems with anything that is privacy oriented, so I will not be surprised if they go after DEX someday because they do not collect KYC data of their users. Most of the funds stolen through hacks are passed through DEX together with mixers and coinjoin, so I think they are in the same category and in the wrong side of government books. Using DEX may not pose a threat to the users but the operators might be targeted through shutting down and other forms of crackdowns.

But these DEXes are inherently not private. About 95%+ of all DEXes live on public blockchains that are updated in real time so it's not like all the trades being done are fully private. They're just not tied to all users using the platform. And I believe that once the clarity actis put in motion, it would become clear about how DEXes should operate. I believe long term, they'd just be regulated but not shutdown. That's a very important distinction.

[Emitdama]

The known DEXs today have their developers and owners named in public, so what makes the government will have to implement if they want something to do with them? I guess that the possibility is there but that depends on what really cracking down means to them. I think it's mostly about regulating them instead of cracking down especially the established ones and they can't ignore volume and profit which translates as tax to them.

Technically, you can't really force a decentralized exchange to shut down because it doesn't rely on a centralized company or office. It runs on smart contracts.

Authorities can take down a website or seize a domain name, but that doesn't necessarily stop the protocol itself. People can simply access it through alternative front ends or interact directly with the smart contracts. It's somewhat similar to how services on the dark web remain accessible through alternative addresses even if a particular website is taken down.

So while they can make a DEX less convenient to use, shutting it down completely is a much more difficult challenge.