- A new Uniswap feature known as KYC hook has divided the DeFi community with some saying it opens the door for regulators
- The feature requires the platform’s users to provide personal information before interacting with a pool
- Although the feature isn’t mandatory, some fear it may be misused by regulators under the guise of curbing money laundering
Uniswap’s new KYC (know your customer) hook has split the DeFi community with some noting that it can be used by regulators to slowly infiltrate the space, while others consider it a blessing to the DeFi world. The feature requires Uniswap v4 users to provide personal details in a world where users want to stay relatively anonymous. Although the KYC hook is currently an opt-in, the discussion around it shows a double standard by the community who sometimes seek the help of conventional parties such as the FBI when they lose funds through DeFi hacks.
“Next It’ll be Mandatory”
One of those criticizing the feature noted that DeFi platforms start by providing a “KYC option” for liquidity providers before the option becomes a way for regulators to clamp down on non-KYC’d entities under the guise of preventing money laundering or terrorism financing.
As I explained in all my posts for the past year:
It starts with “kyc option” for LPs.
And then eventually it moves into a “regulator whitelist approved” database hosted offchain.
And then non-kyc gets labeled as illegal terrorist money laundering.
Stop simping for soyboys
— yourfriendSOMMI ❤️💛💚💙 (@yourfriendSOMMI) October 14, 2023
Another unhappy DeFi user noted that “it starts out like this, next it’ll be mandatory,” adding that KYC weakens the DeFi’s building pillars, while others said “KYC has no place in DeFi”
Those supporting the feature argued that the feature is opt-in enabling regulatory-conscious liquidity providers to “operate within the legal confines of jurisdiction.” Others noted that LPs remain permissionless, maintaining that the feature isn’t mandatory.
Seems like you don’t understand how this works. #1 it’s lp specific. Some projects may want to operate within the legal confines of jurisdiction. #2 hooks can be made by communiry devs. You’re trashing something that has done more than anyone else for “real defi”
— TheBattlestation (@bobthebobnes) October 14, 2023
Uniswap Under Civil Investigation
The feature comes three weeks after Uniswap unveiled an education platform to boost adoption and two years after reports emerged that the United States securities watchdog was investigating the DeFi platform.
With the majority of the DeFi community pushing back against the KYC hook, it’s to be seen whether it’ll affect the platform’s usage.
