Uniswap Version 4, also known as Uniswap v4, is set to be released to the crypto community in a few months, possibly coinciding with the Bitcoin Halving event in 2024. However, recent speculations in the crypto community have been swirling about a “peculiar phenomenon” rumored to appear on Uniswap v4 – the introduction of KYC (Know Your Customer) features.
According to sources shared on X (formerly Twitter), the upcoming Uniswap v4 may include a KYC pool feature. This implies that with v4, there could be the establishment of pools exclusively allowing transactions from whitelisted wallets (those that have completed KYC checks).
In reality, the concept of KYC on decentralized exchanges (DEXs) has been somewhat foreign and complex for the crypto community. DEXs’ strength lies in their anonymity. However, it is undeniable that the lack of KYC and AML regulations provides opportunities for unethical individuals to exploit the crypto space for money laundering and other financial crimes.
Not too long ago, in a recent report covered by BeInCrypto, the DEX THORSwap temporarily went into maintenance mode due to a surge in illegal transactions on its platform. Because of this, many industry experts believe that decentralized exchanges will eventually have to adhere to such regulations; it’s just a matter of time.
Before this, in a joint statement in 2019, the SEC, FinCEN, and CFTC required cryptocurrency exchanges like Coinbase to comply with KYC and AML regulations. This led to a lot of unrest in the industry, along with significant fines imposed on some companies.
For example, in 2020, the cryptocurrency derivatives exchange BitMEX faced charges, including inadequate KYC compliance. The company eventually settled by paying a hefty $100 million fine and ensuring that all current users were verified and brought in line with regulations.
In terms of facilitating illegal activities, it seems that DEXs coming under scrutiny and requiring KYC might be inevitable. In the case of Uniswap, if the KYC feature in Uniswap v4 turns out to be true, it could be seen as a proactive and prudent step. Recognizing the legal risks, establishing a framework for KYC and AML compliance at this stage appears to be necessary.