Exclusive Interview: How do Taiwanese cryptocurrency developers view Uniswap front-end review?

The world's largest exchange, Binance, has declared that it will no longer position itself as a tech startup but will move towards becoming a "compliant financial institution," implementing various compliance policies in response to the recent regulatory pressures in many countries. With the advent of the era of compliance, not only is there ferment in centralized markets, but the DeFi sector is also making moves. In response to compliance risks, Ethereum's largest AMM Uniswap may hide synthetic assets that may involve securities on its front-end interface, a move that does not affect the decentralization of the protocol but has sparked considerable discussion.

Many believe that DeFi has no regulatory issues, but in fact, securities laws, anti-money laundering laws, tax laws, etc., can all impact the future development of DeFi.

SEC Chairman Gary Gensler of the United States pointed out in August this year that DeFi platforms are not only subject to securities laws but also related to commodity laws and banking laws, and should be regulated to provide consumer protection. Furthermore, the Financial Action Task Force (FATF) has included cryptocurrency-related entities in the Travel Rule, which may make it difficult for all anonymous wallets to interact with centralized institutions. Coupled with the recent expansion of the definition of brokers under the new U.S. tax law, DeFi protocols may face significant challenges in KYC compliance. These various regulatory developments may indirectly affect the adoption of on-chain protocols.

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What do six DeFi developers in Taiwan think about these issues? Their responses are listed in English alphabetical order: Coinomo, DINNGO, Pelith, Perpetual Protocol, portto, Steaker

Is Uniswap's Front-End Implementation of Review Mechanism Justified?

In consideration of regulation, Uniswap has implemented a review mechanism for its official front-end interface to hide synthetic assets and avoid securities disputes. Despite the decentralization of the protocol layer, some community members believe that this approach is inappropriate and diminishes the governance significance of UNI. Do you agree with Uniswap's approach?

Co-founder of Coinomo, Boan Chen: I agree, it is reasonable for Uniswap Labs, as a company, to comply with U.S. regulations. If removing some tokens can ensure compliance, the cost is relatively low. As a peer in the cryptocurrency industry, I would do the same. The contract itself remains completely decentralized, so regular users can still trade through other aggregators like 1inch, and developers can still trade these tokens through the contract.

Co-founder of DINNGO, Xuanting Zhu: I think it is inevitable to cooperate with the government to a certain extent to enforce regulation, and I welcome it because it is essential to effectively protect the rights of companies, users, and investors. However, I find Uniswap's approach inappropriate. In the DeFi industry, which emphasizes community and communication, they are constantly doing things their own way, from initially issuing tokens, setting governance voting thresholds, to now unilaterally announcing the blocking of certain tokens, which makes it seem like they are ignoring the community. Of course, their approach is not necessarily wrong. They should make the best decisions for the long-term interests of the company, and they do not necessarily need the "consent" of the community. After all, I don't think the community can fully understand where the company will be in the next 10 years and how much unseen pressure is interfering with operations, such as investors, governments, and so on. Ultimately, the company is responsible, and I don't think anyone would want it any other way. However, Uniswap is the largest decentralized exchange (DEX) and has performed really well; they do as they please, and it seems like no one can do anything about it.

Founder of Pelith, Pin Chen: The front-end review by Uniswap can be understood as a "necessity when under the eaves, one has to bow" performance, and it is not unreasonable to delist specific tokens. The dissatisfaction of token holders is inevitable because compared to governance tokens of other DeFi protocols, UNI's positioning is indeed less clear. The Uniswap protocol itself does not have many parameters that need to be voted on, and there are no assets other than UNI in the treasury that need to be planned for use. Let's take a look at the Synthetix that was delisted this time; they knew early on that DeFi could face regulatory pressure and prepared thoroughly, including meaningful on-chain governance and supporting several teams to develop Synthetix front-ends, such as Kwenta, instead of just the official one. They even disbanded the off-chain legal entity, which can be said to be well-prepared for decentralization. Perhaps it's due to considerations of practical interests and resources, Uniswap's efforts in this regard are far less than other DeFi projects.

Founder of Perpetual Protocol, Yanwen Feng: I agree. The Uniswap protocol itself is deployed on Ethereum and aligns with the characteristics of decentralization, and the front-end web page is also open-source for everyone to use freely. The community cannot dictate that the team needs to handle everything.

Co-founder of portto, Xuan Li: I think it is imperative, and such situations may become more frequent in the future. Many decentralized exchanges like Uniswap will ultimately face challenges with various anti-money laundering regulations. In the future, many other decentralized exchange protocols may adopt similar approaches to Uniswap: the protocol itself is decentralized, but the front-end interface is partially centralized, and various ERC20 tokens can still utilize Uniswap contracts for trading functionality, but may not be visible on the Uniswap interface.

Founder of Steaker, Weixuan Huang: I consider Uniswap's approach as a compromise. In the long run, if new markets to some extent comply with regulations, they can usher in larger-scale growth, while maintaining the decentralized nature of protocols. I believe that the community will discuss and come up with better approaches in the future.

Would You Block Users or Conceal Risky Tokens for Compliance?

The U.S. SEC has mentioned that "stock tokens," "certain stablecoins," and "synthetic assets" may all involve securities, and based on the long-arm jurisdiction principle, are you considering blocking U.S. users or concealing tokens mentioned by the SEC on the front end?

Co-founder of Coinomo, Boan Chen: If we want to provide services in the U.S., we will select tokens to offer based on local regulations. Not only in the U.S., but we currently provide services in Taiwan and Southeast Asian countries, and we will adjust the tokens offered based on the regulations of each country.

Co-founder of DINNGO, Xuanting Zhu: We are not currently planning to actively delist any assets, let the government agencies battle with money protocols first. Our aggregator itself should not be the current focus, it's better to observe, and hopefully in the future they will amend laws to accommodate these new things.

Founder of Pelith, Pin Chen: We do not have such plans at the moment, but if there is a clear demand in the future, such as for developing the U.S. market or interacting with capital, a similar blocking solution may be considered. But honestly, both regulatory authorities and the regulated parties are aware that this is just turning a blind eye.

Founder of Perpetual Protocol, Yanwen Feng: We have already excluded U.S. users from the front-end web page. However, there are also open-source versions of the front-end web page for the perpetual protocol developed by other third-party teams, so the impact of excluding the U.S. on the main page is not significant.

Co-founder of portto, Xuan Li: In our own situation, because we have many commercial clients who are U.S. companies or individuals, and a significant proportion of our users are from the U.S., we will continue to carefully consider U.S. regulations. For tokens with more security characteristics, we will block users from the U.S. and Canada on the front end.

Founder of Steaker, Weixuan Huang: Steaker's product has always been about real-time market detection and dynamic adjustments. Although there are currently no exclusion plans, if regulatory issues affect the performance of target placements in the future, further evaluation will be made by a professional strategy team.

Concerned About KYC Pressure from Travel Rules?

In addition to securities regulation, the FATF's Travel Rule requires Virtual Asset Service Providers (VASPs) to verify the identities of users' wallet addresses, which may further impact DeFi protocols. What are your thoughts on this?

Co-founder of Coinomo, Boan Chen: I guess this has a significant impact on the way DeFi is popularized to the general public. After all, it is cumbersome to require real-name registration for every user. Developers of DeFi may, in order to avoid this hassle, cooperate with more compliant exchanges and wallets (CeFi) to provide services to the general public. In addition, DeFi itself is still lagging behind CeFi in terms of deposits and user experience, which will also push future development in that direction.

Co-founder of DINNGO, Xuanting Zhu: Regulatory authorities may want real-name authentication simply to trace the flow of funds, but in DeFi, every transaction can actually be traced. Therefore, it is unnecessary to use current regulations to request us - we set higher standards than regulations. In the traditional world, only transactions above a certain amount or meeting specific conditions need to be reported, but in DeFi, every transaction can be transparently viewed by anyone, so centralized exchanges like CEX are better for regulation, as their ledgers are not as transparent as DeFi, and they even have the opportunity to tamper with them. Moreover, they are at the intersection of fiat and cryptocurrency worlds. By listing CEX, governments can achieve the tracking effects they desire.

Founder of Pelith, Pin Chen: Due to the characteristics of blockchain technology, practically speaking, it is impossible to regulate the senders of transactions. Just like Bitcoin and Ethereum, users can operate the blockchain themselves, and there is basically no role for service providers like browser wallet or mobile wallet manufacturers. Therefore, what you currently see is regulation of KYC for centralized exchanges, rather than for browser wallet or mobile wallet providers. And DeFi ideally aims to achieve the same level of decentralization as Ethereum, where regulation is not a question of whether, but of capability.

Founder of Perpetual Protocol, Yanwen Feng: The FATF rules have not been finalized, so it's too early to comment at this stage. I think regulations can be stipulated this way, but it is absolutely impossible to cover all wallet endpoints, as everyone can generate and manage their wallets through programs. If regulations are enforced rigidly, I think it will only drive more users to underground services or use anonymous services.

Co-founder of portto, Xuan Li: This will happen someday, and many companies in the industry are making efforts towards decentralized identity verification. However, at the current stage, for "non-custodial wallets" or "DeFi protocols," the infrastructure for real-name verification is not mature enough and cannot yet comply with the Travel Rule.

Founder of Steaker, Weixuan Huang: Requiring DeFi projects to comply with real-name verification for wallets is practically unattainable. We look forward to more reasonable approaches in the future, and perhaps due to facing challenges, there will be RegTech service providers that emerge for this purpose.