The SEC's potential lawsuit against the Uniswap decentralized exchange will become a significant precedent for the cryptocurrency market, although the possible victory of the department in this trial is still in great doubt. This was stated to ForkLog by the interviewed experts.
What is being presented is unclear
According to the notification received by Uniswap, the SEC found some violations of securities laws in the company's activities. However, no specific claims have been voiced.
"I think we are not talking about the regulation of decentralized financial products, but about what the DeFi product has done with certain assets, most likely related to securities - stocks, bonds and others," says Andrey Tugarin, founder of the GMT Legal law company.
Uniswap has 30 days to respond, in which it must legally substantiate the illegality of the charges. The exchange team has already declared itself \"ready for battle\".
The SEC's interest in Uniswap could be considered a kind of compliment to the developers, if we omit the negative effect of such "attention", says Nikita Zuborev, an analyst at the BestChange aggregator.
"Uniswap, after $2 trillion in traded volume, has finally become a large enough and serious exchange to attract the attention of the American regulator and spend investigative resources on it," he explains.
The expert believes that the Commission continues the trend towards the most in-depth regulation of the market, as far as current US laws allow, since in reality it has rather limited powers. Therefore, if the court is rational and consistent, then no DEX should be regulated.
"Formally, this is an over-the—counter segment, because despite the interface like the exchange, the platform itself does not act as an intermediary, transactions are conducted using decentralized smart contracts," Zuborev notes.
According to CeDeFiAi founder and acting CEO Tony Bee, in this case, the SEC is once again showing absolute incompetence. Instead of forming clear guidelines for regulating the industry, it "knocks out loot" from established innovative products, and instead of "protecting investors", it tries to cause panic in the markets, leading to the opposite effect.
"The shake—up of retail in the markets is often the work of the Commission itself, and it may be thought that [SEC head] Gary Gensler has been "buying at the bottom“ all this time,” the expert argues.
In the short term, this confrontation does not threaten ordinary users of the exchange. Tony Bee reminds that the SEC lawsuit has not yet been filed, and the lawsuits themselves, in the absence of guidelines, last for years.
"Most likely, they will come to a fine and compromise if no one thinks of playing Ripple," he concluded.
Nikita Zuborev calls the case "a deliberately losing case" due to the insolvency of the prosecution, as Uniswap lawyers have already provided exhaustive explanations.
"Optimism is added by the fact that last year the site already won in court with a group of defrauded investors. The essence of the proceedings was different then, but the theses used by the judge (the main one is that the site is not related to token issuers) can strengthen the defendant's position," the analyst stressed.
Nevertheless, he points out the importance of the wording if the SEC brings the case to court:
"Here we are dealing with case law and any reservation can be used in the future against other projects. In particular, it is important how exactly the judge will name cryptocurrencies that the SEC considers unregistered securities. So far, this is the main area for various speculations around crypto projects — Securities vs. Commodities."
Cryptocurrencies are not securities
Indefibank CEO Sergey Mendeleev did not see "anything new" in the claims from the SEC. According to him, the agency clings to any process in which illegal securities trading is allegedly taking place, and whether it is decentralized or not is the tenth question.
"Of course, cryptocurrencies are not securities of any kind, but they can't catch crooks from Wall Street, they can accidentally get out on themselves there. And it is necessary to fulfill the KPI, so we came up with entertainment for ourselves," the expert said.
Liquidity pools and other similar instruments may potentially be at risk, since they are suitable for all parameters of the Howie test, Nikita Zuborev believes.
"Simple PoS tokens are not securities for the reason that not every purchased token makes a profit, but only those that will be frozen in the stake. With a more rational approach, they could turn their attention to this mechanism and make claims to the organizer of the betting pools and/or the stake holders, but not to the sites for the purchase of digital goods," he noted.
The analyst found it difficult to predict whether the SEC would follow the path of common sense or continue to "shoot sparrows with a cannon." Depending on the chosen strategy, there will be different DeFi projects in the risk group.
"If they connect experts, then all the betting/farming sites will suffer. If the lawsuits continue to be scattered at random, then centralized exchanges that had the imprudence to work with US citizens are at risk (these are, in fact, all exchanges older than six years — from the era of trading without KYC), as well as just large market players — who knows where erroneous logic will lead them — even have risks utility-NFT\", — Zuborev listed.
Yulia Palamarchuk, product manager and marketer of DeFi products, suggests that platforms with the largest total blocked funds (TVL), such as Compound, AAVE and 1inch, may be of particular interest to the SEC in the first place.
It is impossible to adjust DeFi
Blum co-founder Gleb Kostarev is convinced that an attempt to regulate the decentralized finance industry is obviously doomed to failure.
"It is impossible for someone to prohibit the launch of smart contracts that allow you to automatically exchange one asset for another. I doubt that the SEC will be able to win this trial," he said.
On the other hand, this case is a clear signal to the industry: regulators will closely monitor the field of decentralized finance.
"The arrival of regulation in this industry, first of all, will concern the introduction of mandatory KYC at the level of exchanges or wallets in the coming years, and this, most likely, will not be avoided," Kostarev believes.
Tony Bee predicts that sooner or later landing protocols will also be attacked by regulators, since they are effective tax avoidance loopholes.
In turn, Yulia Palamarchuk recalled that the SEC's sphere of influence is limited to the territory of the United States — their regulation primarily concerns transactions taking place within this jurisdiction. Therefore, for users of DeFi products who are not American citizens, the risks are minimal.
"Even attempts to block the access of US citizens by IP addresses, thanks to VPN services, may be ineffective," she said.
In general, the expert is convinced that regulating DeFi will require a new approach to the globalized financial system, and at the moment it seems to be a difficult task.
Earlier, the US Treasury Department called for the adoption of a law expanding the scope of the agency's activities in the "ecosystem of digital assets", as well as rules that solve jurisdictional problems for regulating foreign companies in the industry.