In a warning to Uniswap on Wednesday, the Securities and Exchange Commission stated that it plans to file an enforcement action against the company. Uniswap is the main platform for DeFi, a market segment in which traders use computer protocols that function as automated market makers to exchange different tokens.
The alert took the shape of a “Wells Notice,” which is a last-ditch attempt by the SEC to refute any claims sent to a company before filing a formal lawsuit. Given that the government is currently conducting a broad investigation into the cryptocurrency industry and has allegedly been looking at Uniswap for some time, this procedure is probably going to amount to little more than formalities in this instance.
“The SEC does not comment on the existence or nonexistence of a possible investigation,” an agency representative stated when contacted for comment.
The details of the SEC’s accusations against Uniswap Labs, the firm that developed the eponymous system but does not own it, are yet unknown to Fortune.
However, the government is expected to assert that the company failed to register as an exchange or broker or that it unlawfully provided unregistered securities to the public based on its recent actions against well-known cryptocurrency companies like Coinbase.
The Uniswap case is expected to occur at a time when the cryptocurrency industry has been vocal about its complaints that the SEC has been acting unfairly toward the industry, pursuing enforcement proceedings in spite of regulations that are clearly in place while ignoring the unique blockchain technology used by the cryptocurrency. Sen.
Elizabeth Warren (D-Mass.), a strong ally of SEC Chairman Gary Gensler, has retaliated by saying that the crypto industry has demanded special treatment while not complying with the clear regulations already in place.
Numerous high-profile litigation, most notably involving Coinbase and Ripple, have already resulted from the SEC’s confrontation with the cryptocurrency industry. These challenges center on the SEC’s authority over digital assets and the appropriate application of a 1946 Supreme Court test that defines securities to cryptocurrency.
The ongoing cases have yielded inconsistent outcomes, granting both parties the advantage; nonetheless, the latest decision indicates that the SEC is leading the legal charge.
However, considering the specific characteristics of DeFi technology and the company’s noteworthy legal win in a class-action lawsuit last year, the result of the Uniswap case is quite uncertain.
Given that DeFi, a once-minor segment of the cryptocurrency market, has expanded quickly, the stakes in any legal action brought by the SEC against Uniswap Labs will be significant.
The protocol has enabled over $2 trillion in transactions, according to Uniswap’s recent announcement, and mainstream banking is becoming more interested in the potential of the underlying technology.
DeFi platforms for autonomous vehicles
The central body that acts as a counterparty for trades and as a go-between for buyers and sellers is absent from DeFi platforms, in contrast to traditional brokerages and cryptocurrency exchanges.
Rather, they depend on automated protocols that are managed only by code and establish guidelines for trading, collateral needs, and other matters.
In the instance of Uniswap Labs, the company’s founder, Hayden Adams, built the initial core code that drives the protocol and offers a trading interface for certain cryptocurrency tokens. However, many other DeFi projects employ the protocol, which is open-source.
The resolution of a class-action lawsuit that was brought against Uniswap Labs last year, alleging the corporation was accountable for traders who had been duped, depended heavily on this distinction. The plaintiffs in that lawsuit contended that Adams had created something akin to a deadly self-driving automobile that was out of control.
Uniswap Labs also used the metaphor of the self-driving car, but they contended that the technology they had developed was neutral and that it was outside of their control whether people used it for good or harm.
A federal judge sided decisively with Uniswap Labs in a well-reasoned decision that went into great depth on the complexities of DeFi, giving the DeFi industry a significant win.
More recently, the judge in the SEC’s lawsuit against Coinbase last month refused to dismiss the company’s allegations that it was selling unlawful securities, but she did decide that Coinbase’s decentralized wallet service could not be regarded as a broker for the purposes of the SEC’s jurisdiction.
Though it ignores the company’s interface, which it controls and which has in the past highlighted coins the SEC eventually determined to be securities, this judgment is likely to strengthen Uniswap Labs’s argument in any litigation with the SEC.
Uniswap Labs is ready to put up a “worthy fight” in court, according to people close to the company, who also told Fortune that the company’s decision to operate in broad daylight in New York City rather than overseas demonstrates its validity.
Disclaimer : This article was created for informational purposes only and should not be taken as investment advice. An asset’s past performance does not predict its future returns. Before making an investment, please conduct your own research, as digital assets like cryptocurrencies are highly risky and volatile financial instruments.
