Crypto Ecosystem

Could Uniswap introduce KYC?

, October 19, 2023

In this week’s crypto highlights, we explore the price movements of BTC, BOND, LQTY, and BAND. Additionally, this recap includes other notable industry news items that occurred over the last seven days. Without further ado, let’s dive into the latest market developments.

Noteworthy market events

KYC hook on Uniswap v4 fueled debates about DeFi’s future

Uniswap community developer, Jongwon Park, rolled out a know your customer (KYC) hook in Uniswap v4’s directory as an opt-in functionality. Essentially, a hook is a tool that allows developers to customize code without altering the main structure of the program. In Uniswap v4, it will enable developers to incorporate KYC verification into the decentralized finance protocol.

Once this hook was discovered, two main perspectives emerged:

  • Against it: Some community members consider KYC introduction a betrayal, calling Uniswap a “fake DeFi.” Offering permissionless services was widely considered one of the core DeFi principles, but KYC could arguably destroy it. 
  • In favor of it: On the other hand, some argue that this hook is specific for liquidity providers, and may be useful for projects that must comply with regulatory requirements in certain jurisdictions.

In response to criticism, Park said that permissioned tools on blockchains are inevitable “like tech itself.” He added that Uniswap still remained permissionless, and that its contracts are “immutable on a protocol level.” 

Some regulators have already taken action against DeFi protocols. For instance, in September, the U.S. Commodity Futures Trading Commission (CFTC) announced that it had issued orders against Opyn, ZeroEx, and Deridex. In addition, U.S. Securities and Exchange Commission’s (SEC) Crypto Enforcement Chief David Hirsch stated that DeFi projects won’t escape the division’s attention.

It’s important to keep in mind that this KYC hook is optional. It remains to be seen which pools it will be integrated with, if any. In addition, Uniswap is not the first to go the verification road in the DeFi space. dYdX and Aave incorporated screening processes earlier for wallets linked to illegal activities.

Uniswap plans to release its v4 protocol by the end of 2023, or in the first quarter of 2024.

FTX unveiled a revised plan to return 90% of creditor holdings

Bankrupt crypto exchange FTX announced a new plan to reimburse around 90% of creditor holdings held at the exchange, following its November 2022 collapse. This plan covers approximately $8.9 billion for FTX.com, and $166 million for FTX.US. customers.

The debtors’ organization handling the bankruptcy process intends to formally present this proposal to the U.S. Bankruptcy Court by December 16, 2023. If the plan is approved, FTX customers may recover most of their funds by the end of the second quarter of 2024.

Another notable aspect of the plan is the potential exclusion of “insiders, affiliates, and customers,” who may have been aware of the mishandling of customer deposits and company funds.

Ferrari began accepting cryptocurrency as a payment method

According to Reuters, Italian luxury carmaker Ferrari added digital assets as a payment method in the U.S. This feature is set to roll out in Europe in the first quarter of 2024. Ferrari’s Chief Marketing and Commercial Officer, Enrico Galliera, stated that this is the outcome of dealer requests and increased demand from clients. It also serves as a strategy to attract young investors with substantial cryptocurrency wealth.

Ferrari has teamed up with BitPay to enable cryptocurrency payments, and Galliera offered that there will be no extra fees or surcharges for such transactions.

The SEC reportedly won’t appeal a decision in Grayscale case

According to Bloomberg and Reuters, citing their own sources, the SEC has decided not to challenge the court’s ruling on Grayscale’s spot Bitcoin ETF. Some market participants anticipate that this could boost the odds of Grayscale’s application approval. Bloomberg analyst James Seyffart said that a dialogue between Grayscale and the SEC should begin in the next two weeks.

In August, U.S. Court of Appeals Circuit Judge Neomi Rao stated that “the denial of Grayscale’s proposal was arbitrary and capricious.” She ruled that the company’s application to convert its trust into an ETF must be reviewed. 

One sentence news

  • The Australian government introduced a new proposal paper on regulating crypto exchanges operating in the country. 
  • Mastercard announced that it completed a trial involving wrapping central bank digital currencies (CBDCs) on different blockchains.
  • Liquid staking protocol Lido Finance ceased operations on the Solana blockchain, following DAO voting results.
  • Crypto exchange WOO Network reached an agreement to repurchase shares and tokens previously acquired by bankrupt hedge firm Three Arrows Capital (3AC).
  • Trezor marked its 10th anniversary with the launch of three new hardware wallets.
  • Uniswap introduced 0.15% swap fees for a variety of assets, including ETH, USDC, USDT, and DAI, via its web app and wallet interfaces.

Notable price performances

Bitcoin approached $30,000 amid false rumors

On October 16, Cointelegraph tweeted that BlackRock’s spot Bitcoin ETF had received approval. The post was deleted after nearly 30 minutes, but it was enough for markets to react, pushing the BTC price to $30,000. But then, it quickly dropped to $28,000 as BlackRock clarified that its Bitcoin ETF application was still under review. According to Coinglass data, these price fluctuations led to over $100 million in daily liquidations. Cointelegraph apologized for its mistake. 

Shortly before this rollercoaster, Bloomberg analysts stated that spot Bitcoin ETFs have a 90% chance of approval by January 2024. In turn, there were reports that this event could be partially priced in, but the latest events showed there still could be room for significant market reaction. According to Coinmarketcap data, general crypto trading volume surged to a two-month high amid  Cointelegraph’s erroneous report.

This “false catalyst” helped the BTC price bounce off the descending resistance line (white line), and broke the 200-day SMA. The daily RSI didn’t reach the oversold zone, while the asset moved out of it on lower timeframes. This hints that there could be short-term upward potential. However, the following price movement is likely to depend on whether or not bulls manage to protect the 200-day SMA, which is located near $28,000. Decentrader data shows that this area is lying in a zone between major longs and shorts of varying leverage.

If the bulls defend the 200-day SMA, the asset may try to retest $29,000. If failed, this could potentially open the road to $26,500.

BOND jumped amid voting to comply with regulatory requirements

When discussing KYC on Uniswap, some community members highlighted that certain DeFi projects may require these measures to comply with regulatory requirements. And a DeFi protocol BarnBridge might be a good example. This crypto lending platform faced an SEC investigation in July 2023, resulting in the halting of its operations.

The project’s DAO recently voted on how to respond to the regulator, and decided in favor of undertaking all necessary actions to comply with its order. Following this news, the BOND price more than doubled in a few days. However, shortly after that, a price correction occurred, driving the price to the 0.786 Fibonacci point. 

The asset reached the middle of the Bollinger channel on a daily chart, and bulls would need to protect $2.78 to indicate that upward momentum hasn’t faded away completely. If the price moves below this level, the BOND may return to the price range that preceded the recent rally. 

LQTY saw double-digit gains following increased user activity

The native token of the Liquity crypto lending protocol, LQTY, experienced a parabolic price increase, with over 80% in monthly gains. According to Liquity, the protocol has seen increased user activity over the past month, which could be contributing to the price movement. In addition, the platform’s native stablecoin, LUSD, received an A rating from Bluechip, a non-profit stablecoin-rating agency. This might have boosted user’s confidence in the platform.

The LQTY price reached an overbought zone on a daily timeframe, and formed a bearish divergence (white lines). This indicates that upward momentum may be fading, and a deeper price correction could follow soon. The $1.30 and $1.16 levels could act as the next potential targets for bears.

BAND broke an almost year-long resistance

Another digital asset that joined the top gainers club is BAND, a native token of the oracle network Band Protocol. Its price soared by almost 40% in a week, breaking a descending resistance line that had been in place since November 2022. 

Following this move, the asset started to consolidate near the $1.35 level. However, BAND reached the overbought zone on a daily timeframe, while AO formed a twin peaks pattern on lower timeframes. This hints that the asset may fail to sustain above this level. In this case, the price may try to retest the descending resistance line. 

Tune in next week, and every week, for the latest CEX.IO crypto highlights. For more information, head over to the Exchange to check current prices, or stop by CEX.IO University to continue expanding your crypto knowledge.

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Disclaimer: For information purposes only. Not investment or financial advice. Seek professional advice. Digital assets involve risk. Do your own research.

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