US Regulator ‘Investigating’ Crypto Exchange Developer Uniswap Labs

The US financial regulator are reportedly investigating a start-up behind one of the world’s biggest cryptocurrency exchanges, Uniswap.

The Securities and Exchange Commission has launched a probe into Uniswap’s main developer, Uniswap Labs, the Wall Street Journal reported, citing unnamed sources.

Uniswap Labs is a leader in the field of decentralised finance, or DeFi, and Uniswap is the single biggest decentralised exchange.

Enforcement attorneys are looking into how Uniswap is marketed and how investors use it, the report said.

Decentralised trading

The SEC declined to comment. Uniswap Labs said in a statement that it 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, based on the Ethereum blockchain, allows users to conduct automated transactions between cryptocurrency tokens through the use of smart contracts.

The platform’s latest version had a volume of about $39 billion (£28bn) in August, with a previous version that’s still in use handling about $14bn in trades, according to CoinGecko.

As of early September 2021, the platform was generating about $3.5m per day in fees for the liquidity providers who facilitate the transactions, according to Crypto Fees.

The reported investigation comes as US regulators are increasingly scrutinising the cryptocurrency industry, with SEC chairman Gary Gensler in August announcing plans for more rules targeting decentralised finance, token offerings and stablecoins.

Regulation

Also in August the regulator signed a deal with blockchain analytics firm AnChain.AI to provide assistance in monitoring DeFi activity.

Gensler recently called for lawmakers to give the SEC more power to ovesee crypto-assets and DeFi platforms, which are not regulated in the US.

In July Uniswap Labs delisted dozens of tokens and tokenised stocks from its trading platform, stating that it had taken the decision in light of “the evolving regulatory landscape”.

The delisted tokens included those that may be at risk of being classified as securities by a regulator, including tokenised stocks, options tokens, and insurance-based tokens.

Because the Uniswap protocol is itself decentralised and is not controlled by any one party, the delisting actions occurred only on the interface Uniswap Labs develops for the protocol.

“These changes pertain to the interface at app.uniswap.org – the protocol remains entirely autonomous,” Uniswap Labs said at the time.

Hacking risk

Last month hackers stole $600m in cryptocurrency from decentralised finance platform Poly Network.

Regulators around the world are tightening restrictions on digital financial tools such as crypto-assets, with the EU saying it plans to introduce rules covering the field by 2024.

Matthew Broersma

Matt Broersma is a long standing tech freelance, who has worked for Ziff-Davis, ZDnet and other leading publications

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