The U.S Securities and Exchange Commission has launched an investigation into the largest decentralized finance platform in the world – Uniswap. According to a report by the Wall Street Journal, the SEC is looking into Uniswap’s marketing and investor services. This inquest comes just a month since chair Gary Gensler revealed that the watchdog has jurisdiction over DeFi platforms.
Uniswap is an Ethereum-based decentralized exchange that allows users to swap tokens built on Ethereum. Unlike exchanges like Binance and Coinbase, Uniswap has no central entity. It has shot up to become the undisputed leader in the DEX space and even rivals some centralized exchanges in terms of the trading volume. It also boasts of having $2.9 billion in total value locked.
In the past 24 hours, it processed $1.62 billion, more than Bithumb, Kraken, Bitfinex and Binance.US.
Despite being decentralized, Uniswap is now on the radar of the SEC. According to sources who asked to remain anonymous, the regulator has been seeking information on “how investors use Uniswap and the manner in which it’s marketed.”
The SEC has declined to respond to media requests, including from the WSJ, claiming that it neither confirms nor denies investigation reports.
Meanwhile, a spokesperson for the exchange told WSJ that it’s “committed to complying with the laws and regulations governing our industry and to providing information to regulators that will assist them with any inquiry.”
SEC can’t shut down DeFi – Expert
The inquest into Uniswap is the SEC’s clearest yet that it intends to regulate the DeFi sector. Since its inception a few years ago, the DeFi sector has been assumed to be beyond the scope of the SEC, given that platforms like Uniswap are decentralized.
However, regulatory pressure has been getting to DeFi. In July, Uniswap delisted 100 tokens from its app interface i.e the front-end web app portal. However, these tokens remained on the Uniswap Protocol which is entirely autonomous, permissionless and immutable.
While delisting the tokens, the platform hinted it was because of regulatory pressure, claiming that “we monitor the evolving regulatory landscape.”
Weeks later, SEC chair Gary Gensler gave an interview in which he told WSJ that DeFi platforms have some features that make them look like the type of entities regulated by the SEC.
He stated:There’s still a core group of folks that are not only writing the software, like the open-source software, but they often have governance and fees. There’s some incentive structure for those promoters and sponsors in the middle of this.However, according to serial entrepreneur and cryptocurrency thought leader Alistair Milne, the SEC can’t shut down Uniswap or any other DeFi platform. However, it can make it illegal to use these platforms, much like the dark web.