Uniswap Pool Mulls Integrating KYC Check
Despite the know-your-customer (KYC) and whitelisting features being presently a community recommendation for Uniswap, several consider their executions are unavoidable.
Integrating KYC and Whitelisting Triggers Mixed Reactions on DeFi’s Future
Uniswap’s is eyeing improvement with the decentralized exchange (DEX) opening code recommendations to the community. Nevertheless, not all people are excited by all the suggestions. For instance, community-provided code for a Know Your Customer (KYC) and whitelisting features have elicited concerns regarding DeFi’s future.
whitelisting addresses and executing KYC checks are tools utilized to avert illicit activities. Additionally, through an online identity authentication process, they ensure adherence to global sanctions. The proposals form part of ‘Hooks,’ a new feature by Uniswap that permits third-party developers to suggest various alterations or amendments to the market’s biggest DEX.
Presented by Jongwon Park, a blockchain developer, a Hooks code includes KYC checks prior to permitting users to trade on a pool. The code has elicited concerns, with Adam Cochran, a famous decentralized finance investor, terming it a ‘slippery slope.’ He claimed that by developing ‘the tool for authorized systems, one motivates regulators to push for their utilization even in unnecessary situations.
Jongwon Part responded by claiming that ‘similar to tech itself,’ authorized tools on the blockchain are unavoidable. He also said that Uniswap was still permissionless, and on a protocol level, the contracts remain ‘unchallengeable.’
Create Robust Foundation to Enhance Coexistence in Permissioned and Permissionless Protocols
Park said that as early adopters, their job should entail creating a robust foundation to enhance the coexistence of permissioned and permissionless protocols. However, the two are still isolated. It is yet to be established which pool, in case of any, the hook will be integrated.
Seraphim Czecker, a Lido contributor, said that the KYC Check will not be utilized a lot. A majority of trading companies and bots that enhance activities are similar to traditional finance prop companies. They prefer being hidden and do not intend to KYC.
Uniswap and other decentralized finance protocols, for instance, Aave and dYdX, have included monitoring procedures for wallets associated with illicit actions.
The DEX has been monitoring and restricting addresses associated with entities penalized by the United States Department of the Treasury against targeted foreign regimes, nations, terrorists, and global criminals.
In 2022, Uniswap and TRM Labs, a blockchain security company, collaborated to enhance its monitoring process to restrict funds associated with illegal activity. An example entails stolen funds or money that passes via Tornado Cash, a restricted protocol. Previously, authorities have severally attempted to impose compulsory KYC on decentralized finance applications and self-custody wallets.
Numerous projects are striving to offer a permissionless and safe compliance process for Web3 applications. Examples of these projects include Astra Prop, Civic Pass, Parallel Market, and Polygon ID.
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