Securities and Exchange Commission (SEC) is investigating the main developer of Uniswap Labs, the company behind one of the world’s largest cryptocurrency exchanges. The Wall Street Journal reported the news on Friday, citing “people familiar with the matter.” Apparently, enforcement attorneys are investigating how investors use and market Uniswap.
Chairman of SEC Gary Gensler said last month that the agency is able to regulate decentralized finance initiatives (DeFi) projects. Gensler noted at the time that DeFi projects with valuable tokens or similar incentives might be regulated, regardless of how “decentralized” they claim to be.
Uniswap’s Response to SEC
“The company 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.” a spokesman for Uniswap Labs said. The Authority declined to comment. The story notes that the civil investigation into Uniswap is in its initial stages and may not yield any claims of wrongdoing. Exchanges like Uniswap are part of the growing decentralized finance or DeFi marketplace. Besides cryptocurrencies, DeFi refers to different types of savings and transmission accounts, exchanges, and derivative markets.
Many developers have argued that DeFi transactions are automatic, therefore oversight authority is not necessary. Even though the authority acknowledges that some cryptocurrencies are decentralized enough to escape monitoring when participants are given incentives, that crosses over into authority territory.
“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,” Gensler said. “There’s some incentive structure for those promoters and sponsors in the middle of this.” Earlier this week, Gensler said the crypto market has grown large enough — to the tune of $2.1 trillion — that it needs regulation in order to survive. Without a regulatory framework, he said, the crypto sector could lose public trust.