The Securities and Exchange Commission (SEC) of the United States has issued a Wells notice to Uniswap, the decentralized exchange.
Marvin Ammori, Uniswap’s chief legal officer, confirmed the receipt of the notice on April 10 via X (formerly Twitter). In his tweet, Ammori expressed disappointment at the SEC’s action, which was, however, not unexpected given the regulatory climate. He explained that a Wells notice signifies the SEC’s intent to recommend enforcement action against a company or individual. This notification grants the recipient an opportunity to present a written defense, known as a “Wells submission,” to contest the proposed action.
Uniswap facilitates automated token swaps on the Ethereum blockchain, eliminating the need for traditional intermediaries like centralized exchanges.
The SEC has been investigating Uniswap Labs, the primary developer behind Uniswap, since 2021. Previously, Uniswap has removed several tokens from its platform due to increasing regulatory scrutiny.
Uniswap Labs has defended itself by asserting that it solely develops the front-end interface for the application. This interface is separate from the Uniswap protocol itself, which operates as autonomous code available for public use. Ammori emphasized that neither the Uniswap Protocol nor its associated web app and wallet meet the legal definitions of securities exchanges or brokers. He stressed the importance of clear regulations for the crypto industry, advocating for a transparent legal framework rather than arbitrary enforcement.
The SEC has issued similar notices to other crypto exchanges, including Coinbase and Binance, in the past.
As the U.S. SEC takes legal action against crypto protocols, the European Union is progressing with its Markets in Crypto-Assets (MiCA) regulation, which covers DeFi protocols and their interfaces. By December 30, 2024, the EU regulator is expected to produce a report evaluating the feasibility of specific regulations for the decentralized finance market. This report will explore how decentralized systems, particularly those lacking a clear issuer or service provider, should be regulated within the region.