DeFi
The ongoing SEC lawsuit against Uniswap is bad policy
It didn’t have to be this way. On Wednesday, the Securities and Exchange Commission reported he will sue Uniswap, the most prominent company in the rapidly evolving crypto space known as DeFi. This is disappointing not only because the SEC is on shaky legal ground, but also because the agency risks stifling one of the most intriguing new technologies to emerge in finance in years.
If you are not familiar, Challenge (decentralized finance) offers a new twist to the age-old model of exchange and brokerage trading. Instead of relying on a centralized authority to arrange a transaction, buyers and sellers trade directly with each other on a platform that provides an automated market maker linked to so-called trading pools. liquidity. The technology is new enough that it’s difficult to summarize in a few words (CoinDesk has a good explainer), but the key point is that DeFi enables trading in a faster, safer, and more efficient way than ever before.
Like many other new technologies, DeFi has many problems, including hacks, scams, and a plethora of scumbags like the Mango Markets guy I know. wrote Tuesday. The underlying technology is legitimate, however. Mainstream publications like The Economist and the Wall Street Journal have touted its long-term promise, and I regularly encounter people in the traditional finance world who predict that DeFi-like platforms will challenge a range of existing applications in the years to come.
Meanwhile, DeFi’s flagship company is the antithesis of a shady offshore crypto business. Uniswap’s headquarters is located right in the middle of Manhattan’s SoHo, and his COO graduated from Harvard Law and worked for years at BlackRock and Goldman Sachs. Its founder and CEO is a soft-spoken and well-respected computer scientist who developed the Uniswap protocol after being laid off at Siemens. This is precisely the kind of cutting-edge startup that should be hailed as an American success story.
Unfortunately, as is often the case with new technologies, Uniswap and other DeFi platforms do not fit neatly into existing regulatory models. And while regulators and Congress would once have worked to craft new laws to foster it – as they did 25 years ago in response to the internet – the SEC is instead seeking to stifle DeFi as part of a broader ideological campaign to crush crypto. In this case, however, the agency may have picked the wrong fight given that Uniswap is an honest operation with a deep war chest to plead. The legal battle will likely take years and serve to slow the evolution of a promising new technology. What a shame it had to happen this way.
Jeff John Roberts
jeff.roberts@fortune.com
@jeffjohnroberts
DECENTRALIZED NEWS
The CEO of Singer Fitzgerald, which is the custodian of Tether, has enthusiastically endorsed stablecoins as a boon for the strength of the US dollar. (Bloomberg)
Hedge funds Breven Howard‘s crypto fund, which has $1.7 billion in assets, returned 35% in the first quarter. (Bloomberg)
Short sellers bet against a Bitcoin asset company Microstrategy have lost nearly $2 billion since March, while those betting against Coinbase and Bitcoin miner CleanSpark also lost big. (Reuters)
New investigation reveals younger generations are just as likely to have crypto as a house, and this owns more crypto than stocks. (Fortune)
Bitcoin rebounded above $70,000 after falling 4% in response to higher-than-expected consumer inflation data. (CoinDesk)
EVEN WHERE
Vitalik wears a Uniswap shirt c. 2017:
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