In the open directory of the decentralized financial protocol (DeFi) Uniswap V4 found a hook designed to complete the Know Your Customer (KYC) procedure. It has drawn criticism from users who expect additional regulatory scrutiny.
One of the features of Uniswap v4 will be the use of hooks. These are tools that allow developers to modify code without changing the main version of the program. It is expected that these plugins will help implement new functions for liquidity pools. For example, limit orders and individual on-chain oracles.
3/ We’ve written a few sample hooks to demonstrate their expressiveness & capabilities:
⌛ Time-weighted average market maker (TWAMM)
🔮 Customized onchain oracles
📖Onchain limit ordershttps://t.co/Yu5OGIdxe3 pic.twitter.com/ZdFqElnsap
— Uniswap Labs 🦄 (@Uniswap) June 13, 2023
According to the description in the catalog, the KYC hook is designed to verify the identity of clients before trading on the Uniswap decentralized exchange.
Let us remind you that there is no need to undergo such verification now. To make an exchange, just connect your wallet, specify the desired trading pair and amount.
Some X (formerly Twitter) users suggested that the protocol could come under scrutiny from regulators after the new feature is implemented.
❤💛💚💙
Disappointing NEWS:
Uniswap is bringing out KYC Verification in the form of a Hook for Uniswap v4.
UniswapX is also using a “permission required” off-chain server.
It starts as an “option” and then we all know how it ends…
Uniswap is Fake DeFi.
👎🏻👎🏻👎🏻 pic.twitter.com/1h0BqOsufd
— yourfriendSOMMI ❤️💛💚💙 (@yourfriendSOMMI) October 14, 2023
In the comments to the X post, he explained that if users refuse verification, they will not be able to use certain features. And their actions will be regarded as illegal money laundering.
Financial institutions use KYC procedures to verify the authenticity of customers’ identities and assess the associated risks. The main purpose of such an audit is to identify money laundering and terrorist financing activities.
Another user X noted that the KYC-related hook is intended for liquidity providers. He believes it is useful for projects that must comply with regulatory requirements in certain jurisdictions.
Seems like you don’t understand how this works. #1 it’s lp specific. Some projects may want to operate within the legal constraints 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
In September 2023, an SEC representative announced possible regulation of the decentralized finance sector. That same month, the Commodity Futures Trading Commission fined three DeFi protocols for trading without a license.
Source: Cryptocurrency
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