Uniswap Labs Put on Notice by the SEC

Uniswap is a popular decentralized cryptocurrency exchange. However, recent news indicates it may not be around forever.

Whether or not you use the Uniswap platform, keep reading to learn about what may happen to it and what other cryptocurrency platforms can expect to see in the coming months from the SEC.

What is Uniswap?

Uniswap is a decentralized or DeFi exchange which is run by Uniswap Labs and operates on the Ethereum blockchain. Uniswap uses a unique liquidity pool protocol, allowing users to swap different cryptocurrencies without having to wait for a matching order. This lowers the wait for exchanging coins, allowing the platform to act a bit like a market maker even though it is decentralized.

This liquidity pool protocol relies on users who want to become liquidity providers by locking a certain cryptocurrency in a smart contract or dApp. While they are providing liquidity, they can’t use the cryptocurrency that is locked away, but they do receive a small amount of returns, similar to interest, as a thanks for providing liquidity.

Additionally, any user who wishes to add a new token to the platform can do so, as long as it is an ERC-20 token, and they provide a minimum level of initial liquidity. The easy entrance process has allowed the platform to grow swiftly over the years since its inception.

Uniswap was founded in 2018 and is completely open source, making it a favorite among DeFi enthusiasts. It is also currently one of the largest platforms in the space, with over $3 billion in liquidity.

Related: Uniswap (UNI) ERC-20 DEX Overview

The SEC Gives Uniswap a Wells Notice

Now that you know what Uniswap is, and a little bit of how it functions, it’s time to get back to the news piece. Hayden Adams, the founder of Uniswap Labs, recently received a notice from the SEC.

The specific notice he received is a Wells notice, which indicates that the SEC intends to take action against the company. While the details were unclear, the SEC has been very outspoken in the past about their distaste for cryptocurrency trading.

Unfortunately, this notice means that Uniswap will be facing a large legal battle, which may even make it all the way to the Supreme Court. Of course, nothing is certain just yet, but either way the future of the platform is uncertain.

What Does This Mean for Uniswap?

As mentioned above, Uniswap is headed for a long legal battle. But like most legal issues in the United States, nothing will be done overnight, and it is likely the issue will draw out for months—meaning there is no need to panic just yet.

Adams is adamant that the SEC will not take Uniswap down. Not only is the platform fully decentralized (meaning it’s hard to place the blame on Uniswap Labs), but Adams has also indicated that if the SEC comes for Uniswap, then they will have to come for Coinbase, Kraken, and other popular platforms first—as they are way more centralized.

Not only that, but if worse comes to worst, and the SEC prohibited Uniswap Labs from operating in the United States, because the algorithm used for the Uniswap liquidity pools is open source, someone else could easily make another similar platform overnight.

Basically, the SEC vs Uniswap is like a game of whack-a-mole. The minute they snuff out one, another will inevitably pop up, even if it isn’t under the name Uniswap.

What Should Uniswap Users Do?

There is no need for Uniswap users to do anything at this time. Those who use the platform regularly have no reason to panic, though if you don’t already, it might be a good idea to subscribe to a cryptocurrency newsletter, like the one here at MintDice.com. This can help keep you in the know if there is a large development regarding Uniswap and its future.

Is Uniswap in Danger?

Right now, Uniswap isn’t going anywhere, but the SEC could force it to shut down in the future or cease operations within the United States. While we doubt this will happen, it is possible. But until that moment, keep calm and carry on as normal.

Related: Ethereum and the SEC: The Drama Unfolds

Is Cryptocurrency in the US In Danger?

The Wells notice served to Uniswap Labs is the latest in a long line of crackdowns by the government against cryptocurrency and cryptocurrency trading. While this crackdown has caused some harm to various companies (causing many to cease operations in the US) no matter what the US government does, they will not stop the existence of cryptocurrency.

Cryptocurrency is a bit like Pandora's box. Now that it exists, there is no way to go back and make it un-exist. Not only that but allowing cryptocurrency firms and trading is currently a game theory issue within the United States. The US government may not want to allow crypto firms to operate within the US, but if they don’t, this won’t stop Americans—they will simply go elsewhere to trade crypto.

If this happens, the US government will lose out on the tax dollars they could earn from simply regulating cryptocurrency, instead of banning it. This brings up another issue, as much as the US government wants to control cryptocurrency, they will never be able to do so because of its decentralized nature.

All of this combined creates quite the conundrum, as US officials try (and fail) to control cryptocurrency and the corresponding platforms. We just hope they will switch to a policy of acceptance and partial regulation before losing some of the largest cryptocurrency firms to other countries.

Overall, Uniswap receiving a Wells notice is bad news, but it doesn’t mean the platform will go under overnight. In fact, the US government is likely heading for a long battle with Uniswap Labs, along with other firms. While we can’t say for sure who will win, we are confident that Uniswap Labs will prevail—so keep using the platform as you will!

You May Also Enjoy: The 5 Best Decentralized Exchanges

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