The platform, which recorded massive growth in both users and trading volume amid the DeFi boom, reported that its decision was fueled by growing regulatory scrutiny in the crypto-asset industry and the need to measure up with regulatory demands.
A statement published on its official blog on July 23rd, 2021, reads:
“To continue to innovate and provide this tool for the Uniswap community, we monitor the evolving regulatory landscape. Today, consistent with actions taken by other DeFi interfaces, we have taken the decision to restrict access to certain tokens through app.uniswap.org. These tokens have always represented a very small portion of overall volume on the Uniswap Protocol”
Uniswap’s decision to delist tokens hardly comes as a surprise, as companies in the industry continue to face mounting pressure from regulators around the world. The delisted tokens which include tokenized stocks, insurance-based tokens, and options tokens are at risk of being classified as securities and have been subject to scrutiny by regulatory watchdogs in recent times.
Regulation on Crypto
A typical instance is German regulatory watchdog BaFin’s warning issued to investors, explaining that Binance’s offering of tokenized stocks without an investor prospectus is in violation of securities laws.
Binance had earlier listed tokenized versions of Tesla (TSLA), Coinbase (COIN), Microsoft, Apple, and MicroStrategy (MSTR) stocks, a decision which was swiftly met by a potpourri of regulatory attacks. The largest cryptocurrency exchange by trading volume finally bowed to pressure in July when it announced via a blog post that it will cease to support tokenized stocks on its platform.
One of the plausible reasons why Uniswap took the same path to delist tokens is the lack of regulatory clarity on digital asset classification. The tussle between the United States’ Securities and Exchange Commission (SEC) and Ripple best highlights this. The financial watchdog filed a lawsuit against Ripple and its executives for allegedly selling unregistered securities late last year.
SEC argued that Ripple’s native asset, XRP is security, not a cryptocurrency. Although the case is yet to be decided on, it has definitely left a cloud of uncertainty in the air with a slew of industry players, particularly token issuers and exchanges walking a tight rope.
In the United States where Uniswap Labs is headquartered, hard stance policies that guide the cryptocurrency sphere are in full effect. New SEC chair, Gary Gensler stated that he is “keeping a close eye” on stock tokens and reiterated the SEC’s mandate to clamp down on stock token issuers and other securities law violators. Crypto lending platform BlockFi is the latest to feel the heat from regulators in the US. The firm was issued cease and desist orders by the Texas State Securities Board, Alabama Securities Commission, and New Jersey Bureau of Securities for allegedly selling unregistered securities via interest-bearing accounts.
Although Uniswap has managed to keep a clean slate in regulatory matters, its resolution to delist some tokens can be viewed as a prophylactic move against possible sanctions in the future.