KYC hook for Uniswap v4 stirs community controversy

A brand new hook accessible on an open-source listing for Uniswap V4 hooks is sparking controversy inside the crypto neighborhood. The hook allows customers to be checked for Know Your Buyer (KYC) earlier than they’ll commerce on a pool.

Criticizing the hook, a person at X (previously Twitter) noted that the hook opens up the potential for decentralized finance protocols being whitelisted by regulators:

“As I defined in all my posts for the previous yr: It begins with “kyc possibility” for LPs. After which ultimately it strikes right into a “regulator whitelist authorized” database hosted offchain. After which non-kyc will get labeled as unlawful terrorist cash laundering. Cease simping for soyboys.”

Primarily, a hook is a software that enables builders to customise a code with out altering the principle construction of this system. In Uniswap V4, this hook will allow builders to make use of KYC verification inside the decentralized finance protocol.

Monetary establishments use KYC procedures to authenticate buyer identities and assess related dangers. A major purpose of KYC is to detect cash laundering and terrorist financing actions.

The KYC hook was rolled out by a neighborhood developer on Uniswap V4’s listing as an opt-in performance. The KYC verification is carried out by a nonfungible token (NFT). According to a different X person, the hook is restricted for liquidity suppliers and could also be helpful for tasks that should adjust to regulatory necessities in sure jurisdictions:

“Looks like you do not perceive how this works. #1 it is lp particular. Some tasks could need to function inside the authorized confines of jurisdiction. #2 hooks may be made by neighborhood devs. You are trashing one thing that has carried out greater than anybody else for “actual defi”.”

Governments around the globe are taking a more in-depth have a look at DeFi protocols and transactions. Just lately, the group of twenty worlds’ largest economies, G20, accepted a crypto regulatory roadmap proposed by the Worldwide Financial Fund (IMF) and the Monetary Stability Board (FSB) tightening crypto laws.

Uniswap V4 introduces customizable hooks and is anticipated to be accessible in early 2024, with entry restricted to governance-approved entities.

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