The SEC wants to sink one of finance’s most innovative technologies

If you’re unfamiliar, DeFi (decentralized finance) provides a novel twist on the centuries-old model of the exchange and brokerage business. Instead of relying on a centralized authority to arrange a transaction, buyers and sellers trade directly with each other on a platform that provides an automated market maker tied to so-called liquidity pools. The tech is new enough that it’s hard to sum up in a few words (CoinDesk has a good explainer), but the key point is that DeFi makes it possible to trade in a way that’s faster and more secure and efficient than ever before.

Like many other new technologies, DeFi has plenty of problems—most notably hacks, scams, and a plethora of scumbags like the Mango Markets guy I wrote about on Tuesday. The underlying tech, though, is legit. Mainstream publications like The Economist and the Wall Street Journal have touted its long-term promise, and I regularly encounter people from the world of traditional finance who predict DeFi-style platforms will challenge a range of legacy applications in coming years.

Meanwhile, DeFi’s flagship company is the antithesis of a shady, offshore crypto venture. Uniswap’s corporate office sits smack in the middle of SoHo in Manhattan, and its COO is a Harvard Law graduate who spent years working at BlackRock and Goldman Sachs. Its founder and CEO is a soft-spoken and widely respected computer scientist who developed the Uniswap protocol after getting laid off at Siemens. This is precisely the sort of cutting-edge startup that should be hailed as a U.S. success story.

Alas, as is often the case with new technologies, Uniswap and other DeFi platforms don’t fit neatly into existing regulatory models. And while regulators and Congress would have once worked to craft new laws to foster it—as they did 25 years ago in response to the internet—the SEC is instead seeking to smother DeFi as part of a broader ideological campaign to crush crypto. In this case, though, the agency may have picked the wrong fight given that Uniswap is an aboveboard operation with a deep war chest to litigate. The legal fight will likely take years and serve to slow the evolution of a promising new technology. What a shame it has to be this way.

Jeff John Roberts
jeff.roberts@fortune.com
@jeffjohnroberts

DECENTRALIZED NEWS

The CEO of Cantor Fitzgerald, which is a custodian for Tether, enthusiastically endorsed stablecoins as a boon for the strength of the U.S. dollar. (Bloomberg)

Hedge fund Breven Howard‘s crypto fund, which has $1.7 billion in assets, returned 35% in Q1. (Bloomberg)

Short-sellers betting against Bitcoin asset firm Microstrategy have lost nearly $2 billion since March, while those who bet against Coinbase and Bitcoin miner CleanSpark also lost big. (Reuters)

A new survey finds younger generations are as likely to own crypto as a house, and that more own crypto than stocks. (Fortune)

Bitcoin has bounced back above $70,000 after slumping 4% in response to higher-than-expected consumer inflation data. (CoinDesk)

MEME O’ THE MOMENT

Vitalik rocks a Uniswap shirt c. 2017: