The decentralized exchange Uniswap has taken a step away from its self-proclaimed "decentralization" by starting to block the addresses of users it considers potentially involved in illegal activities.
It is unknown how many addresses have been blocked so far on Uniswap. However, there are already users who report this situation on social networks. Such was the case with tweeter @ 0x9fd, who shared a screenshot showing the error message thrown by the system with respect to an address.
It is not recommended to use Uniswap
The message claimed that the address in question was "associated with one or more blocked activities". The tweeter accompanied the image with a brief comment: “I strongly advise against using Uniswap”.
The development stems from an agreement reached by the protocol's lead developer, Uniswap Labs, with blockchain asset tracking company TRM Labs. An event that was announced this week.
In its FAQ section, Uniswap Labs explains that they receive data from TRM Labs which "combines blockchain data and real-world research to identify financial crime and other malicious activities."
"We only intend to block wallets that involve or are associated with clearly illegal behavior such as: sanctions, terrorist financing, violated or stolen funds, ransomware, human trafficking and child pornography (CSAM)" - Uniswap Labs.
In the same section of its website, Uniswap Labs explains that blocking an address is because it has been identified as having "a high probability of being linked to illegal activity". In other words, the organization recognizes the system's margin of error. Nonetheless, it will be enforced.
In this sense, they say they don't expect many mistakes, "but they are always possible". When a user wishes to appeal for the blocking of one of his addresses, he must contact the compliance division "to inquire about the process of unblocking his wallet address".
Increased regulatory pressure on user privacy
Uniswap is not the first platform to bow in this way to regulatory pressures seeking greater control over the movement of cryptocurrency users' funds.
In fact, just this week we reported how Binance, the exchange with the largest trading volume in the world, has begun to restrict the operations of Russian users on its platform.
Meanwhile, international organizations such as the Financial Action Task Force (FATF) are seeking tighter regulation for bitcoin and the world of cryptocurrencies in general. Just a few days ago, the FATF said in a report that it will be stricter in terms of tightening controls on the industry. Always, however, supporting a strong fight against illegal financing actions.
Uniswap's move was not well received in the cryptocurrency ecosystem. Being a decentralized protocol, in theory it should be free from censorship, as well as open financial systems to everyone.
