US SEC Starts Scrutinizing Decentralized Exchange Uniswap
The US Securities and Exchange Commission has opened an inquiry into Uniswap, the world’s biggest decentralized financial network. As per the Wall Street Journal, the SEC is investigating Uniswap’s marketing and investor offerings. This inquiry arrives less than a month after chair Gary Gensler said that the regulator had authority over DeFi systems.
Uniswap is an Ethereum-based decentralized exchange that enables users to trade Ethereum-based tokens. Uniswap, with exception of exchanges such as Binance and Coinbase, does not have a centralized organization. With respect to trading volume, it has risen to become the uncontested winner in the DEX market, even rivaling certain centralized exchanges.
It also has a total worth of $2.9 billion locked up. It handled $1.62 billion in the last 24 hours, far beyond Bithumb, Kraken, Bitfinex, and Binance.US combined. Despite its decentralized nature, Uniswap is already on the SEC’s radar. As per individuals who requested to stay anonymous, the regulator is seeking more data on “how investors utilize Uniswap and how it’s promoted.”
The SEC has refused to reply to media inquiries, including those from the Wall Street Journal, saying that it neither acknowledges nor dismisses inquiry allegations. Nonetheless, a spokesman for the exchange told the WSJ that it is “dedicated to adhering to the rules and regulations regulating our business, as well as giving relevant data to authorities that will help them with any investigation.”
The Uniswap investigation is the SEC’s best sign that it wants to oversee the DeFi industry. Because platforms such as Uniswap are decentralized, the DeFi sector has been considered to be outside the purview of the SEC since its creation a few years back.
DeFi, on the other hand, has been subjected to regulatory scrutiny. Uniswap axed 100 tokens from its platform, or front-end web app site, in July. These tokens, nevertheless, stayed on the Uniswap Protocol, which is completely autonomous, permissionless, and unchangeable.
While delisting the tokens, the app alluded to regulatory pressure, stating that “we follow the changing legal landscape.” Weeks later, SEC head Gary Gensler told the Wall Street Journal in a discussion that DeFi platforms had certain characteristics that make them seem to be the kind of companies supervised by the SEC.
“There is still a core set of people who are not just creating the software, such as open-source software, but they often have oversight and fees,” he said. In the midst of this, there is some kind of incentive system in place for those marketers and backers.”
New scoop: @SECGov is investigating @Uniswap Labs, the startup behind the biggest DeFi exchange. We also report SEC Enforcement is sweeping crypto lending platforms for information. https://t.co/GT05Q0W8H9
— Dave Michaels (@davidamichaels) September 3, 2021
The SEC, nevertheless, cannot close down Uniswap or indeed any other DeFi site, as per serial entrepreneur and bitcoin think tank Alistair Milne. Nonetheless, similar to the dark web, it has the potential to render the usage of these sites unlawful.