SEC Begins ‘Actively Investigating’ World’s Largest DEX

September 06, 2021, 9:45 AM AEST - 3 weeks ago

The Securities and Exchange Commission (SEC) is reportedly investigating Uniswap Labs, the parent company of the leading decentralised exchange (DEX), Uniswap. 

The SEC Wants to Regulate DeFi

The Wall Street Journal reported the news on September 3, citing “people familiar with the matter” that SEC enforcement attorneys are actively investigating how users interact with the protocol and how the DEX is marketed.

This comes after the regulatory body highlighted its interest in tapping into the crypto and the decentralised finance (DeFi) space by overseeing crypto operations and lending. 

Naturally, the crypto community has rejected the SEC’s intentions to enter what the regulatory body has called “the wild west of finance”. 

Last month, SEC chairman Gary Gensler called on US Congress to give the agency more authority to police the crypto market and oversee DeFi platforms, which, unlike centralised exchanges, are not regulated in the US.

A Uniswap Lab spokesperson told WSJ that the company is “committed to complying with the laws and regulations governing our industry and to provide information to regulators that will assist them with any inquiry”.

Uniswap Removes 100 Tokens – Afraid of Regulatory Pressure

It should be noted that the SEC’s probe into Uniswap comes shortly after the DEX removed 100 tokens – including synthetic tokens, options and indexes – from the main user interface at the end of July, citing “regulatory pressure” as a major influence on the decision, something that had the crypto community questioning Uniswap’s decentralised system.

Uniswap currently accounts for the entire Ethereum-based DEX trade volume, with over US$10 billion in tokens swapped in the past week as per Dune Analytics data.

Requests for information have a high cost, and the SEC is tapping into the DeFi space by gathering information from one of the biggest DEXs. As pointed out by ShapeShift founder and CEO Erik Voorhees:

It should be highlighted that when a regulator ‘gathers information’ it means millions of dollars in legal costs and millions more in lost productivity is incurred by the target. When no wrongdoing is found, the regulator doesn’t reimburse for its transgression, nor even [does it] offer apology.

Erik Voorhees, CEO/founder, ShapeShift [Twitter]

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