Uniswap labs the company behind the Uniswap defi app. The app that we all have used at some point for swapping assets to one another. And we must have used it for variety of the Ethereum assets like USDT and many others. This company has been the backbone of the ethereum ecosystem for years.
Recently the company has got the wells notice from the SEC in USA. Now they will be facing the charges for doing the trading and the swap mixer for the crypto without the regulation and the govt interference. They will be treated like they are some sort of the stock market exchange running without any paperwork.
Let's talk about the case and let's discuss how this case would be affecting the ethereum market and the DeFi ecosystem.
What is a wells notice? How does it impact the Uniswap?
SEC sends the wells notice when it wishes to file the charges against the respondent. And once they do respond further legal process would follow. Wells notice is like that notice which would make the first step to get the other party ready for the legal battle. And in this case they are being treated like a legal security exchange running party. And so SEC is started the battle from the legally higher ground.
How does it impact uniswap? Simple. Crypto is treated like a stock in USA. And based on that they have started taking actions on crypto exchanges, coins and the DeFi systems. Like say you have crypto exchange you are running it as a stock exchagne and for that you have to take a license and follow the national regulation. Which means the court case is going to be against the Uniswap and they would be treated like a criminal system. However the type of allegations and the regulation compliance required from them would appear once the case begins. You can read about it here.
How SEC's case against Uniswap an attack on DeFi?
Say you are running a marketplace where the assets are traded with the currency of your own. It's like you are running a jones town. You have your own govt and the citizens and you are not letting the outer govt to interfere on your soil. But the overall nation is under govt. So the govt won't be someone who would tolerate such type of the manipulation from the internal citizens.
As the defi market is a hotbed for the terrorist funding getting it's mixers and the bridges which kind of hides their trail, it's a first place where the govt was supposed to attack but for some reason they are coming so late into this battle. They are going after the Defi protocols and the unregulated centralized mixers. So this way they would be complying with IMF based rules as well as compliance of their own. However this is not taken well by the crypto community. You can read it's drama on twitter here.
Who is next after Uniswap?
Uniswap is not the only swap and the exchange marketplace. There are many others like 1inch, pancakeswap, sunswap, sushiswap, binance, and many others. Ethereum is very large network with the coins which are running their own small ecosystem and it is not that easy to take it down. It would require years of effort to take down one and even more effort to take down all of them. But the start has been signaled by the SEC.
I feel like next would be those protocol projects which are doing the cross border settlements. Govt would want them to do the money movement as per the IMF and the AML based policies. And this would mean that we are back to square one except for the part that now we have the blockchain and the things that would make it easier for the exchanges to handle the tokens through govt regulations.
Uniswap is under attack by SEC. And this time the legal battle would decide the future of the DeFi market. And this would go into the series of the damages that DeFi would be facing. Let's see where the court case goes and it's result for market.