US SEC Investigating Decentralized Exchange Uniswap

The US Securities and Exchange Commission is investigating the startup Uniswap which is the world’s largest decentralized cryptocurrency exchange. On Friday, the Wall Street Journal reported that the US Securities Regulatory Authority has started an investigation into Uniswap Labs. It is Uniswap’s main developer.

The report states that law enforcement attorneys are currently seeking information about Uniswap’s investment and marketing services. It is getting in touch with anonymous sources that are familiar with the matter. A spokesman for Uniswap Labs said that the company is “committed to complying with the laws and regulations governing our industry and to providing information to regulators that will assist them with any inquiry”. Uniswap is a decentralized exchange that allows its users to trade between Ethereum-based coins and tokens without the need for a central organization.

This platform, according to CoinMarketCap, is considered the largest decentralized exchange. It has a trading volume of $ 1.5 billion in the last 24 hours at the time of this writing. An SEC spokesman declined to comment on the existence or absence of a possible investigation. Also, Uniswap did not immediately respond or comment on anything in this context. This news came when the U.S. regulators were paying increased attention to the decentralized finance (DeFi) industry.

US SEC Chairman Says

Just the last month itself, the chairman of SEC, Gary Gensler announced the administration’s plans. They want to introduce more cryptocurrency rules, particularly concerning DeFi, offering tokens and stablecoins. The regulator has signed a $125,000 deal at the end of August with AnChain.AI, the blockchain analytics company to get technical assistance in tracking and regulating the DeFi industry. Before the SEC stepped up the efforts to investigate DeFi, Uniswap removed dozens of tokens and tokenized shares from its trading platform at the end of July, citing growing regulatory pressure. It said, “We monitor the evolving regulatory landscape”. The platform also noted similar moves by other DeFi players.

As its definition states, the DeFi industry is a blockchain-based form of financing. It does not depend on any central financial intermediaries. However, it instead manages transactions through automated protocol mechanisms called smart contracts. In recent years, this industry has seen significant growth. There was an increase in figures from about $8 billion last September to over $174 billion at the time of writing. According to DeFi principles, decentralized exchanges (DEXs) such as Uniswap do not have a central person or group responsible for executing the protocol. Thus, it is managed and controlled either automatically or by participants.

According to Alistair Milne, the crypto investor, and entrepreneur, all these regulators will not be able to shut down DeFi smart contracts such as Uniswap. However, they can make DeFi transactions illegal in a similar way as dark web transactions.

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