The details are unknown, but it is assumed that, as in other cases, the SEC is trying to accuse the exchange of illegal securities trading. According to Uniswap’s lawyer, the web application and wallet cannot be equated with “securities brokers or exchanges.”
The head of the SEC has already commented on the situation. Gary Gensler stated that decentralized exchanges “are not really decentralized exchanges, so they are subject to regulatory policies.” Thus, we are witnessing a case where the Regulator is trying to accuse DEXs of illegal activities.
Lado Okhotnikov, the CEO of the Meta Force metaverse, commented on the situation as follows:
“The impunity and lack of control by the US government over the SEC gives rise to similar problems. This is obvious market manipulation, which is exactly what Changpeng Zhao, the former head of Binance, was accused of. For this, the company was forced to leave one of the largest markets in the world. However, I can cite a dozen crypto exchanges that are still operating in place [Binance]. Such double standards – some are allowed, others are not.”
Indeed, after information appeared about litigation between Uniswap and the SEC, the platform’s native token reacted harshly: UNI fell in price by 15%, and its capitalization decreased by almost $2 billion.
The SEC and the cryptocurrency market have been in confrontation almost since the very beginning of the industry. The cases against Coinbase and Ripple Labs, which issued the XRP token, are prime examples of this. The commission relies on the so-called Howey test in its accusations.
- The Howey test is used to determine whether an asset is a security or not. It is based on the court’s decision in SEC v. Howey Company in 1946. The essence of the test is to check whether an investment meets certain criteria, such as investing money in a company with the expectation of profit from the efforts of other people.
Let’s say someone starts a new project and invites people to buy tokens of this project, promising them profits in the future. The SEC may use the Howey test to determine whether these tokens are securities or not based on how they were offered and investors’ expectations of these tokens.
Experts point out that the test is long outdated and does not take into account the specifics of cryptocurrencies — it leads to uncertainty in the interpretation of laws and legal uncertainty.
Due to SEC scrutiny, Uniswap decides to increase trading fees to 0.25%
Uniswap has decided to create an additional legal fund amid a future lawsuit initiated by the Securities Commission.
For most swaps, the commission will increase from 0.15% to 0.25%. This decision is due to possible legal problems that the DEX exchange may face in the very near future.
“Uniswap’s willingness to resist any legal action [from the SEC] underscores its commitment to the core principles of decentralization. Using the example of Ripple, you can see that litigation led to high costs – during all this time, about $200 million was spent to prove their innocence,” Lado Okhotnikov emphasized in a conversation about the actions of the SEC, which harm the DeFi sector.
- Uniswap is the largest decentralized exchange, occupies 12% of the entire DeFi market and covers more than 960 destinations. It pioneered the use of an automated market maker (AMM) model, replacing the traditional order book-based exchange model.
The decentralization of the protocol means that it does not have a single governing body, and swaps are executed in a peer-to-peer (P2P) manner. That is, the exchange does not act as an intermediary, but as a kind of bridge between users.
Uniswap made it clear that the SEC’s actions are just an agony of powerlessness to oppose anything to the best participants developing technologies on the blockchain.
“We all remember the story with Binance. CZ was accused of market manipulation, but in fact it sent a strong signal to everyone that the Commission would stop at nothing. Apparently, Gary Gensler’s task is to finally drive the industry into a framework in order to impose taxes in the future…, concluded Lado Okhotnikov.
Uniswap rejects the claim that their tokens are securities. Despite the SEC’s position that most coins, with the exception of Bitcoin, fall under their jurisdiction, the exchange will continue to prove otherwise.
In fact, tokens can be thought of as a digital sheet, similar to a spreadsheet or PDF file. This definition alone does not allow us to say that coins are securities. This is the same as saying that every scrap of it was an active share.
A share transfers ownership of a part of the company to the owner. Owning shares also gives you the right to receive a portion of the company’s profits (dividends) and to vote at shareholder meetings. Therefore, to say that a token allows you to own part of a company is incorrect. However, the SEC is trying to say the opposite, although this contradicts the meaning of cryptocurrency, most of which is used for utilitarian purposes (to stimulate participants, reward them, give them access to the ecosystem).
History suggests that Uniswap will most likely stick around. The SEC’s track record is long: Kraken and Nexo have already been fined, Justin Sun has been issued a court order, and Paxos has temporarily stopped issuing the BUSD stablecoin. Don’t forget about Coinbase, Ripple, Telegram with their GRAM token, as well as Near and Solana, and 50 other projects. The case against LBRY, which developed a platform for tokenizing video views, was also closed.
By the way, LBRY could have become a competitor to YouTube, but this did not happen, since the company, after a multimillion-dollar fine, decided to curtail its activities. Apparently the Commission removes the unwanted and leaves the faithful. Next, the SEC will take on the artificial intelligence industry.
Lado Okhotnikov: SEC to switch from cryptocurrencies to AI
In November 2023, OpenAI’s board of directors announced the removal of the CEO due to loss of trust. At the same time, the SEC initiates a new investigation into Sam Altman. Board members noted that Sam was not always forthcoming in his communications, but specific details were not spelled out.
The reality could have been different. Once the SEC began investigating whether investors had been misinformed by the company, it took measures to avoid damage to its business reputation.
The SEC periodically attacks crypto and technology companies due to unclear regulatory policies. For this reason, Bitcoin still cannot be declared a security, since the first cryptocurrency does not have an actual owner, which means there is no one to sue. Apparently Satoshi Nakamoto foresaw problems long before others had them.
In the context of AI technology companies, they will likely retain one representative in each area, with the rest forced out of the market by SEC pressure, preventing competition. As a result of this, Bard, Cloud, Midjorrney, Sora and others will be at risk.
Thus, the American government has developed a good tool to combat competitors in areas where there is demand. After all, there is lobbying for the interests of those exclusively interested in this.
Just recently, Kenya’s Cabinet Secretary for Internal Affairs, Mr. Kindiki reported about the US pressure on the operation of Worldcoin in the country. During a meeting of the public petitions committee, details were revealed about how the Americans demanded the resumption of the crypto project.
It all started when Kenyan authorities detained two Worldcoin executives, Thomas Scott and Alex Blania. They were planning to leave the country, although the United States argued to the contrary, that there were no grounds for their arrest.
According to the source, the US government has been making every effort to convince the Kenyan authorities to allow Worldcoin to operate in the country after the suspension. However, Interior Minister Kithure Kindiki said the decision will remain in force and there are no plans to review it.
This situation has given rise to speculation about the possible connection of Sam Altman, ChatGPT and Worldcoin with American intelligence services, although there is no direct evidence of this. Which leads us to believe that these two projects will have a significant impact on the machine learning industry in the future.
Based on Dan Michael’s materials
The head of Meta Force Press Center
