It wasn't supposed to be this way. On Wednesday, the Securities and Exchange Commission indicated it plans to sue Uniswap, the most important company in the rapidly evolving cryptocurrency space known as DeFi. This is unfortunate. Not only because the SEC's legal footing is shaky, but also because the SEC risks blocking one of the most interesting new technologies that will emerge in the financial sector for years.
For those unfamiliar, DeFi (decentralized finance) is a novel twist on the centuries-old exchange and intermediary business model. Instead of relying on a centralized institution to arrange trades, buyers and sellers trade directly with each other on a platform that provides automated market makers coupled with so-called liquidity pools. This technology is so new that it is difficult to summarize it in one sentence (coin desk There are great explainers out there), but the important point is that DeFi allows you to trade in a faster, safer and more efficient way than ever before.
Like many other new technologies, DeFi has many issues. Of particular note are the hacks, scams, and countless bad guys like Mango He Market Man, which I wrote about on Tuesday. However, the underlying technology is legal.Mainstream publications like economist And that wall street journal I often come across people in the traditional finance world who predict that DeFi-style platforms will challenge a variety of legacy applications in the coming years.
DeFi flagships, on the other hand, are the opposite of shady offshore crypto ventures. Uniswap's headquarters are located in the heart of Manhattan's SoHo, and its COO is a Harvard Law graduate who spent years at BlackRock and Goldman Sachs. Its founder and CEO is a soft-spoken and widely respected computer scientist who developed the Uniswap protocol after being fired from Siemens. This is truly a cutting-edge startup that should be hailed as an American success story.
Sadly, as is often the case with new technologies, Uniswap and other DeFi platforms do not fit neatly into existing regulatory models. And while regulators and Congress would once have been working on enacting new laws to promote DeFi, as they did against the internet 25 years ago, the SEC is instead working to crush cryptocurrencies. is trying to shut down DeFi as part of a broader ideological campaign. But in this case, the agency may have picked the wrong battle, given that Uniswap is a highly litigious shipboard operation. The legal battle is likely to take years and slow the evolution of a promising new technology. What a shame that this has happened.
jeff john roberts
jeff.roberts@fortune.com
@jeffjohnroberts
decentralized news
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meme-o-the-moment
Vitalik is wearing a Uniswap shirt. c. 2017:
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