Uniswap controversy reveals old conflict between DeFi and Washington

Four days after Uniswap Labs and the Uniswap Foundation proposed to merge operations and activate the long-awaited “fee switch,” a dispute on X between the protocol's founder and Gary Gensler's former chief of staff has reopened wounds in the crypto industry that seemed to have healed.

This exchange is not just about a governance vote; it is also a “proxy war” reflecting how Washington and the Web3 community look back at 2022, and whether decentralization (is truly a core value or just a facade to cope with regulation.

Amanda Fischer, currently working at Better Markets and formerly the chief of staff at the SEC under Gensler, has launched the first “attack.” On November 14th, she posted on X that the proposal to merge the activities of the Foundation into the Labs, while directing the protocol fees towards burning UNI tokens, is:

“This page is full of articles saying that Uniswap is shifting towards centralization, as decentralization has never been a core philosophical value but just a legal shield.”

Just a few hours later, Hayden Adams – the founder of Uniswap – responded:

“You once tried to give a centralized monopoly on the US crypto exchange to FTX. I built the largest decentralized market in the world. And you say decentralization is not my value? This is ridiculous. Not everything you read on Twitter is true, Amanda.”

The Ghost of FTX in Washington

Adams mentions FTX not only as a metaphorical expression but also as a reminder of political strategy. In October 2022, a month before FTX collapsed, Sam Bankman-Fried )SBF( announced “Possible Digital Asset Industry Standards” – a policy framework supporting the licensing of DeFi interfaces and requiring OFAC )office of foreign assets control( reviews.

This proposal immediately sparked a fierce reaction from the development community, which sees it as a disguised concession. Erik Voorhees, in an episode of Bankless, accused SBF of “honoring OFAC” and undermining the core values of crypto.

SBF argues that licensing the interface would both hold the source code open and satisfy regulators, but most critics believe this is nonsensical, as the interface is how users access the protocol. At the same time, SBF has become a prominent supporter of the Digital Commodities Consumer Protection Act – which critics call the “SBF bill,” as it would restrict most major DeFi services.

The bill died along with FTX, but this story conveys a message: SBF wants to manipulate regulations to support centralized exchanges, and Washington is ready to cooperate.

Fischer's working time at the SEC coincided with this period. She always advocated for transparency in regulation-making according to the Administrative Procedure Act, and is known as a proponent of strict enforcement. During congressional hearings, she emphasized that crypto can comply with existing securities laws.

This position makes Adams' accusations “weighty”: decentralization is not a core value, according to Ms. Fischer, it is just a legal tool.

Fee switch after 5 years of waiting

The merger proposal is a real structural change. Since the launch of the UNI token in 2020, Uniswap Labs has operated independently of governance, being limited in its participation in protocol decision-making.

The fee switch has not yet been activated due to legal concerns: will activating it turn UNI into a security or not.

Proposed on 10/11, co-authored by Adams, CEO of Foundation Devin Walsh and researcher Kenneth Ng, will:

• Activate protocol fees for Uniswap v2 and v3.
• Transfer profits to burn UNI tokens, while immediately destroying 100 million UNI from the treasury.
• Labs will stop charging fees from the interface, which has generated a total of 137 million USD.

The merger will combine Foundation into Labs, creating “a unified team” to develop the protocol. Some critics argue that this is centralization, reducing the number of “checks and balances.” Supporters, however, view it as efficient: fewer entities lead to faster deployment. The price of UNI once rose by up to 50% after the news, currently standing at 7.06 USD.

Fischer believes that decentralization can only be maintained when it provides legal advantages, and is abandoned when economic interests change. Adams sees this as maturity: a protocol that has survived five years of harsh legal scrutiny, can now balance between value and governance.

2022 viewed from the context

The Tornado Cash sanctions in August 2022 are a significant milestone. When OFAC sanctioned the mixer protocol, it was the first time code faced sanctions. DeFi developers must consider whether Americans can use the protocol legally and whether the interface could be held liable.

Two months later, SBF presented his policy framework in this context, proposing licensing for interfaces, user verification, but still holding an open-source code – many see this as a concession to the “Gatekeeping” model that crypto was created to disrupt.

Adams and builders like Voorhees argue that any access control compromise replicates the Gatekeeping mechanism of traditional finance under the guise of Web3. If you vet users from the start, you have lost the permissionless game.

The importance of Uniswap's position lies in its scale: it is the largest decentralized exchange, processing over 150 billion USD each month and generating nearly 3 billion USD in fees annually, with Uniswap's compliance policy becoming the standard for the industry.

Why it is important today

The SEC has currently eased pressure on crypto. Better Markets' analysis clearly criticizes this regression.

For those supporting implementation, the Uniswap merger is a “victory” slipping away after regulators backed centralization. For Adams and the DeFi community, this is a deserved autonomy after years of harsh scrutiny that once put UNI at risk of being classified as a security.

The FTX reference emphasizes the question: who is really collaborating with whom? SBF lobbied for centralized licensing, while Adams built decentralized infrastructure. One collapsed due to fraud, while the other survived and activated value sharing for token holders.

The debate on X encapsulates three years of tension: does DeFi truly exist, or is it merely convenient when legal frameworks allow it?

The burning of 800 million USD tokens and a governance approval rate of 79% indicate that the market has answered this question itself.

Thach Sanh