According to a report, one of the biggest names in the burgeoning crypto space is in the crossfire of the newly aggressive Securities and Exchange Commission.
An investigation into Uniswap Labs, the developer behind the largest so-called decentralized cryptocurrency exchange, confirms that crypto-related activities you are likely to see are likely to be seen under new SEC Chairman Gary Gensler.
Some have questioned whether the Securities and Exchange Commission (SEC) has the standing to regulate crypto trading, but Gensler appears determined to keep an eye on the funding boom.
The Securities and Exchange Commission will not comment to the Washington Post about the “existence or absence of a potential investigation.”
For its part, Uniswap said in a statement to The Post: “We are committed to complying with the laws and regulations that govern our industry and to providing information to regulators that will assist them with any inquiry.”
A report in the Wall Street Journal said Friday that regulators are investigating how to use and market products created by Uniswap Labs, which developed the DeFi exchange Uniswap for clients.
Uniswap allows people to conduct exchanges – including cryptocurrency trading.
“The platform can trade securities reasonably well, and the SEC could look into that,” Hossein Azari, co-founder of Clarity Money and founder of DeFi platform Cmorq, told The Post. “Of course, the code itself cannot be regulated.”
Decentralized exchanges are part of the growing decentralized finance, or DeFi, space, which has exploded in recent years.
DeFi refers to a group of financial products that operate without an intermediary.
Defi puts the traditional banking activities – lending, trading and buying insurance – on the blockchain, which is a decentralized and immutable ledger that no single entity can change.
Proponents say this makes the products more accessible to the average person. They say that without the participation of brokers and bankers, many services are much cheaper.
But excluding the middle man can also mean taking out the regulator, as the Securities and Exchange Commission, the Federal Reserve and other institutions monitor much of the activity of traditional banks, trading houses, and so forth.
Proponents say the purpose of DeFi is to bring transparency to the financial system by conducting deals and transactions on an open ledger, but they recognize that regulatory scrutiny is inevitable.
“DeFi is creating an entirely new banking system, some of which have not yet been subject to regulatory oversight,” Ian Rosen, partner at Tifin Group and former CEO of StockTwits, told The Post. “This new system will certainly attract regulatory attention to protect the public and punish bad actors – and hopefully they will do so without slowing down the process.”
Cryptocurrency has always been the focus of Gensler from SEC. In a speech at the Aspen Security Forum in August, Gensler said that encryption is “rife with fraud” and “if we don’t address the issues, I worry a lot of people will get hurt.”
Gensler said he wants to expand this focus to include DeFi exchanges.
Last week, cryptocurrencies came under attack from Donald Trump – who said he was not a fan of cryptocurrency – and from hedge fund star John Paulson who criticized Bitcoin and other cryptocurrencies as “worthless”.
Even as prominent figures such as Paulson and Trump have rejected the digital currency, the price of Bitcoin has skyrocketed in recent weeks.
In the past month, the price of Bitcoin dropped below $30K, but it has been steadily rising to $47,000 since that point. In the past year alone, Bitcoin, which is known for its volatility, has jumped from around $10,000 in October to over $60,000 at a time in April.