Uniswap has grown into one of the biggest decentralized finance (DeFi) platforms ever since its launch in 2018, which means it has come a long way in a short time. However, the exchange platform might be in jeopardy following the Uniswap Labs decision to delist some tokens.

The software development organization announced on Friday last week that they plan to restrict access to some of the tokens listed on the Uniswap DEX. The tokens in question include all tokenized stocks developed on Terra’s Mirror protocol, as well as synthetic tokens from projects such as Uma and Synthetix. Even Tether’s XAUT gold-backed token has reportedly been delisted from the DEX.

Uniswap Labs’ decision attracted negative criticism

Unsurprisingly, Uniswap Labs received a lot of backlash on social media platforms, with some claiming that the decision to restrict or delist some digital assets marks the beginning of the end for the DEX. The reason for the backlash is that Uniswap is supposed to be a decentralized exchange but the decision to delist some of the coins did not involve the community. DEXes like Uniswap have a decentralized governance approach through which users stake the platform’s native token so that they can contribute in governance where they get to vote on decisions related to the platform’s operations.

The project’s founder Hayden Adams defended the delistings by noting through a tweet that the Uniswap protocol and the Uniswap interface are not the same things. He argued that the interface is centralized because it is owned and run by the Uniswap Foundation while the protocol is decentralized thus allowing it to be community governed. Adam also stated that the decision was in line with the actions of some other exchanges that have also delisted some coins.

The Uniswap founder was likely referring to Binance’s decision to delist some questions and he was probably also feeling the pressure after U.S regulators revealed plans to scrutinize some DeFi products. Unfortunately, the decision already raised concerns in the community because decentralized exchanges are supposed to operate without oversight from external authorities.

The delistings highlight the Uniswap Foundation’s decision to conform to regulatory pressure which should not be a problem for a decentralized platform in the first place. It makes more sense for Binance to bow to such kind of pressure considering that it is a centralized exchange but it is unexpected for a decentralized platform like Uniswap.

KYC in DeFi?

Recent comments made by a member of the Uniswap team suggest that Uniswap might soon introduce KYC. If the recent announcement about restricting access to some coins on Uniswap was not enough to discourage some people from using the DEX, then KYC would likely lead to a mass exodus. One of the main reasons why DEXes are appealing to users is that they allow users to access the market without the need for stringent regulatory requirements and the collection of user data. Adding KYC to a DeFi and making centralized decisions about coin listings means Uniswap operations are becoming analogous to those of centralized exchanges.

So far the impact of the recent announcement on the UNI token has not been pronounced.  It is currently trading at $19.23 after recovering from last week’s low of $14.01 and has predominantly been bullish for the last week, in line with the prevailing sentiments in the overall cryptocurrency market. However, the backlash observed on Twitter might just be a sign of things to come if Uniswap continues to act against the interests of its community.