One of the biggest crypto exchanges is under investigation by the Securities and Exchange Commission, as regulators probe parts of the digital-asset market that have resisted oversight, according to people familiar with the matter.
Uniswap Labs, the company behind decentralized exchange Uniswap, is being investigated by the Securities and Exchange Commission (SEC).
This decentralized exchange protocol is the backbone for an Ethereum-based exchange that allows any person to swap ERC-20 tokens without going through a middleman.
It also counts among the major players in the decentralized finance (DeFi) ecosystem that replaces centralized middlemen with non-custodial, decentralized applications in traditional financial products.
Reports citing people familiar with the matter state that the SEC is attempting to learn how investors use the platform and how it is marketed.
Neither the SEC nor its employees would comment, saying the agency doesn't confirm or deny investigative reports.
At the same time, Uniswap said to the Wall Street Journal that it "complies with the laws and regulations which govern our industry, as well as providing information to regulators to assist them in their inquiries."
In May 2021, Uniswap launched its third version, which is now the largest decentralized exchange in the market. According to CoinGecko data, it traded for over $1.5 billion within a day.
Despite being "in its early stages," the investigation follows the SEC's chairman Gary Gensler's comments about DeFi's expansion.
Additionally, the SEC chief stated that there is a group inside DeFi who write open-source code, but the code also entails "governance and fees," as well as a "some kind of incentive structure" for those who promote and sponsor it.
Gesler allegedly warned that DeFi projects might break U.S. securities law as well as commodities and banking law in the past.