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One of the largest names in the burgeoning cryptocurrency space is in the crosshairs of a newly aggressive Securities and Exchange Commission, according to a report.
The investigation of Uniswap, which is the developer behind the biggest so-called decentralized cryptocurrency exchange, underlines the scrutiny crypto-related activities are likely see under new SEC Chairman Gary Gensler.
Some have questioned whether the SEC has the standing to regulate cyrptocurrency trading, but Gensler appears determined to police the blossoming corner of finance.
The SEC wouldn’t comment to The Post on “the existence or nonexistence of a possible investigation.” Uniswap didn’t respond to a request for comment.
A Wall Street Journal report Friday said regulators are investigating how products created by Uniswap Labs, which developed DeFi exchange Uniswap, are used by and marketed to customers.
Uniswap allows people to make exchanges — including trading cryptocurrencies and exchanging currencies from crypto to dollar. Uniswap Labs developed the code that underlies the exchange. They also developed an automated version of a market maker that the decentralized exchange sits atop.
“The platform could conceivably trade securities, and the SEC could be looking into that,” Hossein Azari, co-founder of Clarity Money and founder of DeFi platform Cmorq told The Post. “Of course, the code itself can’t be regulated.”
Decentralized exchanges are a part of the growing decentralized finance, or DeFi, space, which has blown up in recent years.
DeFi refers to a patchwork of financial products that operate without a middleman.
Defi puts traditional banking activities — lending, trading, buying insurance — on the blockchain, which is a decentralized, immutable ledger that no one single entity can change.
Supporters say that makes the products more accessible to the average person. And without brokers and bankers involved, many of the services are considerably cheaper, they say.
But taking out the middle man also can mean taking out the regulator, as the SEC, Federal Reserve and other institutions police much of the activity conducted by traditional banks, trading houses and so on.
Proponents say the purpose of DeFi is to bring transparency to the financial system by conducting trades and transactions on an open-ledger, but even they recognize regulatory scrutiny is inevitable.
“DeFi is creating an entirely new banking system, some of which hasn’t yet been subject to regulatory oversight,” Ian Rosen, partner at The Tifin Group and former CEO of StockTwits told The Post. “This new system will definitely attract regulatory attention to protect the public and punish bad actors — hopefully they do so without slowing down the process.”
Crypto has long been a focus for the SEC’s Gensler. In August in a speech at the Aspen Security Forum, Gensler said, crypto is “rife with fraud” and “If we don’t address the issues, I worry a lot of people will get hurt.”
Gensler has said he wants to expand that focus to include DeFi exchanges.
In the last week crypto has come under attack from Donald Trump — who said he wasn’t a fan of crypto — and from hedge fund star John Paulson who slammed Bitcoin and other cryptocurrencies as essentially “worthless.”
Even as prominent figures like Paulson and Trump diss the digital coin, the price of Bitcoin has jumped in recent weeks.
Last month the price of Bitcoin dropped below $30,000 but has been steadily climbing to $47,000 since that point. In the last year alone, the notoriously volatile Bitcoin has jumped from around $10,000 in October to more than $60,000 at one point in April.
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