Celsius Debacle Could Fuel Regulatory Risk in DeFi Exchanges (Cryptocurrency: UNI-USD)

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After crypto lending platform Celsius froze customer withdrawals earlier this week amid heightened market volatility, decentralized exchanges like the Uniswap protocol could face increased regulatory scrutiny.

Because Uniswap is decentralized, it is “exempt from regulatory oversight centralized exchanges,” Bank of America analyst Alkesh Shah wrote in a note Tuesday.

Uniswap, an automated market maker that facilitates token exchanges by replacing order books with liquidity pools, “may be required to register with the SEC as a National Securities Exchange or broker-dealer,” Shah noted, adding that the securities agency announced in February Proposed amendments to the Exchange Act that would expand the definition of an exchange in a move “probably intended to bring decentralized exchanges within its framework.”

Also, “when Uniswap needs to register as a broker-dealer, like Coinbase (NASDAQ: COIN), it would be required to provide disclosures, including specific risks, for each of the thousands of tokens available on its platform. Both registration and regulatory compliance are costly as it would require a large increase in headcount, Shah warned.

Meanwhile, UNI (UNI-USD +3.5%), the native governance token of the Uniswap protocol, is slightly higher but almost falling to $3.77 just before 12:00 ET 25% M/M and from more than 90% from its peak in May 2021 when crypto winter sets in.

Take a look at CoinMarketCap’s list of top decentralized exchanges that may be affected by the regulatory scrutiny.

Earlier this week (June 13), crypto exchange Binance temporarily halted bitcoin withdrawals.

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