DEXs Losing Supremacy As Regulation Tightens

The Trend Continues

Utilizing DEXs in 2021 as opposed to centralized exchanges became the default choice of traders and Crypto enthusiasts. Due to countless hacks, users felt safer not having to entrust their coins to a third party. This trend has in many ways continued and is the preferred choice of transacting in 2022. Although custody is in essence lost for a moment, it is automatically returned by default to the wallet of the user within seconds. This does obviously limit the potential risks rather significantly.

Centralized exchanges on the other hand hold coins indefinitely, or at least until the user actually withdraws them. This places coins at risk for extended periods of time, much unlike coins that are traded on CEXs.

Censorship Has Commenced

Another concern of the Crypto community is actually losing access to funds for whatever reason. In other words, being censored financially and ultimately losing access to one’s own wealth. This has always been a very real threat when it comes to CEXs but now a similar threat is on the horizon for DEXs. Something I am sure many were perhaps not expecting, or at least not so soon in the journey of this technology. Apart from interaction on the blockchain between addresses, any third party can become a gatekeeper. This means that any service can in essence limit and marginalize any address they wish to, or as instructed to.

PancakeSwap Makes A Bold Statement

Recently PancakeSwap announced that they will begin geoblocking users from Iran and nine other jurisdictions. The concern here is that this is now becoming standard practice, which begins to raise concerns about future issues. Interesting to note that at the same time Canada froze bank accounts, Jesse Powell warned against holding assets on centralized exchanges, and now even decentralized exchanges are a concern. When you consider the sudden acceleration in addressing and implementing regulatory frameworks, it becomes even more clear that certain locations in the world are going to become increasingly popular.

Necessity Is The Mother Of Invention

People are already being drawn to certain locations due to Crypto friendly regulation and taxation. The need for safe countries that are simultaneously embracing Crypto has the ability to spark creativity and advancement. Once something becomes of vital importance, things begin to move fast. Locations or countries that will most likely flourish due to an inflow of Crypto enthusiasts will possess two very important criteria in my opinion. Firstly, they will have reasonable and tolerable regulations in place that do not stifle activity. Secondly, they will be countries that are not viewed in a negative light by the US and the powers that be.

Consider not being able to trade based on where you live. Miners in China experienced a similar situation when their government banned all Crypto mining. However, once again necessity proved only to create a more favorable outcome. Bitcoin mining is a lot more decentralized, at least by location and China has now played its best hand.

Reaction & Response

Censoring decentralized services will hopefully also create a response that ultimately also has a positive outcome. It is always difficult to envision something before it appears. Another factor to consider is advancement itself within the Crypto world. DEXs are in essence a step up from centralized exchanges. Who’s to say that there will not be a further advancement from here. The foundational layers are still being built and things are advancing at quite a pace.

How will the Crypto community and coders respond to the current rise in financial censorship is the trillion-dollar question. At the end of the day, people go where they are treated best. Countries that begin to be targeted in relation to restriction to Crypto services may indeed see an outflow of residents to other jurisdictions.

Conclusion

It’s quite clear that financial censorship has suddenly just peaked all over the world and can especially be seen in Canada of late. How this new “trend” plays out remains to be seen. Crypto is by no means excluded and centralized, even decentralized exchanges are coming under intensifying pressure. Holding your own Crypto becomes more and more vital with each day that passes. As regulatory clarity slowly begins to form, certain jurisdictions are being seen from a whole new perspective.

Thanks for the visit and see you in the next one.

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