I’m worried about Uniswap (UNI). Uniswap is one of crypto’s most well-known decentralized exchanges. UNI is the governance token for Uniswap. And since September, the price of UNI has been plummeting. In fact, not even bitcoin hitting its all-time high of more than $68,000 in November could rescue UNI from its downward spiral.
[mcrypto id=”20672″]
So what exactly is going on with UNI?
In the first few days of September, investors found out the SEC was investigating how Uniswap is marketed and how its customers used the exchange. Additionally, news of the Uniswap probe broke within two weeks of the SEC charging a DeFi (decentralized finance) lender for selling unregistered securities.
An SEC investigation is never good news. And the fact that DeFi has hit the SEC’s radar means both the services offered and the very concept of what is decentralized is under scrutiny. That’s even worse news.
Crypto’s downward slide in recent weeks has dragged UNI down even further. But what I’m most worried about is what’s going on in the shadows.
In late January, we found out via Twitter that JPMorgan Chase shut down Uniswap founder and CEO Hayden Adams’ bank account “with no notice or explanation.”
“I know many individuals and companies who have been similarly targeted simply for working in the crypto industry,” Adams also said in his tweet.
To me, this sounds like a regulatory agency whispered in JPMorgan’s ear that Adams (and other crypto people) were too risky to have as clients. And the bank dropped them as a result.
I’m not the only person who thinks this. Former CFTC Commissioner Brian Quintenz called the move “shadow de-banking.”
Likely a shadow de-banking of crypto by @federalreserve or @USOCC bank examiners, with direction from the top. If the examiner told a bank that a certain customer is too risky and the bank ended that relationship, the bank is contractually prevented from telling that customer why
— Brian Quintenz (@BrianQuintenz) January 23, 2022
As bad as SEC investigations are, regulators forcing banks to drop clients without an explanation or any accountability is even worse. It also makes me wonder what’s coming next from an enforcement standpoint.
Uniswap’s issues aren’t just regulatory in nature. Because Uniswap is built on Ethereum’s network, the gas fees charged by the exchange for transactions are high enough that many investors simply can’t use it. This will hopefully change when Ethereum switches from proof-of-work to proof-of-stake protocols. That change is expected to happen in June. And the switch could be delayed. So until then, high gas fees limit Uniswap’s utility.
I’m staying away from UNI for now. There are just too many unknowns for me to be comfortable with it. Hopefully that changes in the future.