Did Uniswap just yield to the ‘evolving regulatory landscape’

Regulatory scrutiny is raining hard on DeFi as lawmakers slowly come to terms with the evolving space and its challenges. Uniswap Labs is the latest to bow to such scrutiny, with the project restricting access to hundreds of tokens on the Uniswap protocol interface.

In an announcement made on Friday, the software development firm cited the “evolving regulatory landscape” as the reason behind delisting these tokens. The list includes tokenized and mirror stocks, options, and derivatives.

Regulatory clampdown?

This news came on the back of greater efforts by American agencies to regulate DeFi. Just last week, SEC chief Gary Gesner spoke about the importance of regulating stock tokens and securities. He said,

“Make no mistake: It doesn’t matter whether it’s a stock token, a stable value token backed by securities, or any other virtual product that provides synthetic exposure to underlying securities. These platforms — whether in the decentralized or centralized finance space — are implicated by the securities laws and must work within our securities regime.”

In another speech, CFTC commissioner Dan Berkovitz presented the demerits of unregistered DeFi products. He also touched upon how P2P systems erode protections against fraud and manipulation that intermediaries in traditional markets provide. Unlicensed DeFi markets for derivative instruments are a “bad idea,” he said.

“The CEA requires any facility that provides for the trading or processing of swaps to be registered [with the CFTC]. DeFi markets, platforms, or websites are not registered. The CEA does not contain any exception from registration for digital currencies, blockchains, or ‘smart contracts.”

DeFi under the cosh?

These comments fueled speculations that the agency might regulate the space sometime soon. After evading oversight for years, many DeFi startups, including Uniswap, also attended a virtual meeting with global financial regulators. The aim of the meeting? To make them understand the tenets of this growing financial sector.

In a blog post last month, Uniswap’s CLO addressed the question of a DeFi crackdown and its impact. He noted,

“There have been regulatory proposals that misunderstand DeFi – both the role of different actors and of the technology – and that would impose liability and burdens far beyond current law, and on largely uninvolved software developers.”

Uniswap is far from the only protocol relenting to the demands of financial regulators, however. Just last week, Binance ceased its support of stock tokens across all platforms. Similarly, BlockFi too was targeted by several agencies for allegedly carrying out lending and trading activities through the sale of unregistered securities.