July 21, 2024
Your Preferred Uniswap Pool Could Introduce KYC Verification Soon
Latest Cryptocurrency News

Your Preferred Uniswap Pool Could Introduce KYC Verification Soon

Uniswap, the decentralized exchange, is preparing for an upcoming upgrade and has opened the door to the community for code suggestions. However, some of these suggestions have sparked vigorous debates regarding the future of decentralized finance (DeFi).

One such controversial proposal involves the inclusion of Know Your Customer (KYC) and whitelisting features, which are typically used to prevent illegal activities and comply with international sanctions through online identity verification. These proposals are part of Uniswap’s new “Hooks” feature, which allows third-party developers to propose changes to the market’s largest decentralized exchange.

A code submitted by blockchain developer Jongwon Park has been at the center of the controversy, as it introduces KYC checks before users can trade on a pool. Prominent DeFi investor and analyst Adam Cochran has expressed concerns about this, labeling it “a slippery slope” for the protocol. He argues that creating tools for permission systems could provide regulators with grounds to push for their use even in contexts where they aren’t necessary.

Park defended the proposal, asserting that permission tools on blockchains are inevitable. He maintained that Uniswap remains a permissionless platform, and its contracts are immutable on a protocol level. Park also emphasized the need for early adopters to establish a framework in which permissioned and permissionless protocols can coexist while remaining isolated.

It remains to be seen which pools, if any, will integrate this KYC hook. Some in the community believe that KYC checks may not be widely used, particularly by trading firms and bots, which prefer to remain anonymous and avoid KYC requirements.

Uniswap and other DeFi protocols like dYdX and Aave have implemented screening processes to identify wallets associated with illegal activities. The exchange has been actively screening and blocking addresses linked to entities sanctioned by the U.S. Department of the Treasury, including foreign countries, regimes, terrorists, and international criminals. In the past, Uniswap partnered with blockchain security firm TRM Labs to enhance its screening process and block funds related to illicit activities, such as stolen funds or those passed through the sanctioned Tornado Cash protocol.

Image by pch.vector on Freepik

Disclosure Statement: Miami Crypto does not take any external funding, or support to bring crypto news to the readers. We do not have any conflicts of interest while writing news stories on Miami Crypto.

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