- Uniswap Labs is facing scrutiny by the United States Securities and Exchange Commissions
- Financial regulators globally have noted that DeFi industry has attracted several investors from traditional financial world
- As per the US SEC chair DeFi protocols might still be controlled by the developers
- Levying formal allegations is difficult as such protocols are mostly community-driven
Uniswap labs is the organization contributing to the world’s largest decentralized exchange (DEX). The protocol allows its users to trade and provides automated liquidity provision on Ethereum. However, nowadays with the growing popularity of digital assets, crypto regulations have been gaining much traction. Notably, several cryptocurrency firms have been subject to inquisitions in their activities in a bid to discern if their product offerings are legal. Recently the Uniswap labs is also facing such a probe by the Securities and Commission (SEC).
Investors are shifting from traditional finance
It has been observed that over the past few years several investors are moving in favor of the DeFi industry. Such a sector includes decentralized exchanges that allow us to lend and borrow against crypto. Moreover, in such a platform, we can trade digital assets, and enjoy other services like staking. Notably, in the industry, there is no requirement for any mediator.
Why is the SEC investigating Uniswap Labs?
It is observed that mostly after creating a decentralized protocol and releasing it, developers possess no control over it. Hence the factor helps them protect when it comes to doctrines and regulations.
However, according to Gary Gensler, the chair of the US SEC, DeFi protocols might still be controlled by the developers. Moreover, he suspects that there might be some middlemen who benefit themselves from the profits created from the trading operations.
SEC faces challenges to levy formal allegations
The news of the investigation struck out in the cryptosphere recently. Plopping the scrutiny in the very nascent phase, which implies the inquiry might not conclude in serious or conventional wrongdoing on the parts of the Uniswap Labs. Indeed, as no central authorities are governing these DEXs, levying formal allegations could be challenging. Notably, such protocols are mostly community-controlled. Simultaneously, the investors can access the protocols without going through the official apps offered by the devs.
Regulators focusing more on assets under securities laws
Gary Gensler has noted that financial authorities are focusing more on exchanges that offer assets registered under securities laws. Such exchange platforms enable the trading and creation of digital assets. However, most of the devs claimed that as they don’t control these crypto projects they do not have to register with financial agencies.
According to a spokesperson from Uniswap Labs, the firm is committed to complying with regulations and norms that govern the DeFi sector. Hence they will provide the information to the US SEC that will assist them with any scrutiny.