DEX's on the IC

Developers Programs & Applications
1

Hello,

This message is to any all DEXs currently operating on the IC. I ask you (and your teams) to geo-block any and all USA users unless registered with the SEC, or CFTC.

Here is an example of why I am recommending this. SEC.gov | SEC Charges App Developer for Unregistered Security-Based Swap Transactions… If there are DEXs operating on the IC and they are offering their services to areas in the US without registering or operating under a registered exchange I urge you to consider quickly geo-blocking USA.

https://www.ecfr.gov/current/title-17/chapter-II/part-240/subpart-A/subject-group-ECFR541343e5c1fa459/section-240.15c3-5

https://www.sec.gov/spotlight/cybersecurity-enforcement-actions

“ICOs, or more specifically tokens, can be called a variety of names, but merely calling a token a “utility” token or structuring it to provide some utility does not prevent the token from being a security.”

“If a platform offers trading of digital assets that are securities and operates as an “exchange,” as defined by the federal securities laws, then the platform must register with the SEC as a national securities exchange or be exempt from registration.”

https://govt.westlaw.com/nycrr/Browse/Home/NewYork/NewYorkCodesRulesandRegulations?guid=I7444ce80169611e594630000845b8d3e&originationContext=documenttoc&transitionType=Default&contextData=(sc.Default)&bhcp=1

https://govt.westlaw.com/nycrr/Browse/Home/NewYork/NewYorkCodesRulesandRegulations?guid=I5be30d2007f811e79d43a037eefd0011&originationContext=documenttoc&transitionType=Default&contextData=(sc.Default)

https://govt.westlaw.com/nycrr/Browse/Home/NewYork/NewYorkCodesRulesandRegulations?guid=Ie3242420479311e6b718fc8ac47ba487&originationContext=documenttoc&transitionType=Default&contextData=(sc.Default)

https://www.sec.gov/news/press-release/2023-78

https://www.sec.gov/news/press-release/2020-153

https://www.whistleblower.gov

https://www.federalregister.gov/documents/2021/01/25/2020-27508/margin-requirements-for-uncleared-swaps-for-swap-dealers-and-major-swap-participants

https://www.federalregister.gov/documents/2021/01/05/2020-26536/portfolio-reconciliation-requirements-for-swap-dealers-and-major-swap-participants-revision-of

2

Allowing for technological innovation isn’t just a nice thing, it’s also a legal requirement. The courts have to always consider the implications of their decisions, which is an incredibly hard thing to do with tech innovation. So using a DEX in most of the U.S. is still a very legal thing to do. Unless of course it is being used in a very obvious manner to break the law.

3

No shaking my head… This is where leadership does a very poor job of communicating. I have provided ample material that directly states, if an exchange wants to offer its services to individuals inside the USA then it must adhere to the rules and regulations and they must register, or again geo block/ restrict USA access. This seems to be an ongoing misconception.

Unregistered exchanges whether they are CEX or DEX are NOT LEGAL in the USA plain and simple. If they follow the procedures listed in the links I provided they can follow the process of becoming a registered exchange and obtain a bit license, however, if they do not, they are reported, and then charged. I hate to say I told you so. So, please just geo-block the USA

4

I would discourage any person or company from taking legal advice from anyone on an internet forum. Consult with a licensed legal professional in your jurisdiction and act accordingly.

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5

Lol this isn’t legal advice! These are the rules as they are written! It’s fine, I’ll report ‘‘em myself.

8

Haha, he may want to remove the lawsuits that are anything to do with Kyle Roche. I think we all know what happened there.

Also, inb4 he starts quoting from the Arkham “intelligence” report

https://twitter.com/SHL0MS/status/1678489671083388934?s=08 (argh cant make the pics go away i just wanted the url)

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9

he wants to tear down the ic with geo-blocking he must work for the lawyers taking away any leg the ic has to stand on the no money no power they planing something soon sept maybe

10

These type of attack vectors are exactly the reasons why one individual would not be successful in this community. Especially, when they come from major developers such as yourself. I really encourage you to stiffen up your ethical standards as a major player in the IC. These types of responses are toxic to any work culture and environment. It actually creates a hostile work environment, and I ask you to be more professional in all of your community engagements.

Also, no I am not going to quote the Arkham Report.

11

My goal here is to make sure these projects “play by the current rules” until regulators make it clear, and the process is evident. All I am asking is for DEXs to temp. geo-block USA users until they apply and register as licensed exchanges, or receive direct approval that they disclose to the community. Otherwise, they are breaking several rules regulations and codes of USA laws. Plain and simple, the lit. is very explicit in the process and what is considered. There really are no grey areas in terms of exchanges providing services to US users.

If these types of circumstances continuously occur, the blockchain is only asking for more and more lawsuits, just because the community wants DEXs (myself included), yet they do not like the rules so they think they are subjective. When the rules are explicit. The enforcement of the rules is explicit. As I began studying for my own project, I began to see nothing but red flags. I’m not saying any of this because I want a piece of any lawsuit. I am coming to the forum owned and operated by DFINITY FOR A REASON. Because this is my attempt to speak with the community directly. I do not have any social media for personal reasons. This forum is the best way to express these things to DFINITY and the community at large without needing to be a popular IC member.

Again, I’m doing what I feel is best for consumers, users, investors, and developers in the USA. There is a reality where several DEXs face consequences all because they completely ignored the very explicit rules and regulations around providing exchange services to the USA community.

All it would take is to remove them from these geographic areas, apply for the proper licensing and follow the rules when providing services to the USA. Otherwise, please continue what you are doing just block the USA, otherwise, you will face the consequences.

This is my attempt to be very open, and honest with the community and DFINITY and allow them the opportunity to play by the rules in these areas. Otherwise, small community members and developers will be the ones who pay these “prices”, and have no real ability to change anything unless they follow the only path to hold individuals accountable.

12

You’re the one spreading a fake narrative about class action suits against Dfinity when we know they were carried out to get insider information and competitive advantage.

What’s the end goal here? Try and isolate the US from the IC and then fork it and make your own chain to service that market? Nothing would surprise me at this point.

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13

I want to reiterate I am NOT trying to spread a fake narrative, this information is in the public domain. All I am doing is providing it as support for my claim, and why I am nervous/ want them to adhere to the rules at the very least for now.

Attack vectors, unprofessional, inappropriate, and (or) provocative insinuations are not constructive feedback. As someone with your “Clout” in the community, I’d expect more.

14

I’m gonna go make an “US-centric IC concern-troll bingo card”, so all you guys keep up the narrative I want to get a full house!

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15

If moderators remove @CatPirate indefinitely for the same communication styles I expect the IC moderators to do the same with known/ established members as well.

Again, this only demonstrates my point.

I’ll complete the steps I feel necessary at this point and be done.

I will say this conversation has become extremely toxic and unproductive, and I hope you become more emotionally mature as you continue your developing journey.

Best,

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16

Screaming “centralisation” and demanding censorship. That’s not a great look.

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17

The community has already “indefinitely censored” other community members for the same exact style of communication. One I might add I see you carry in most of your conversations. In reality, all I am asking for is for them to play by the same standards “normal” users have on here.

Just because you bought out SNS-1, and are now a known and well reputable developer in the ecosystem, does not give you the right to engage in such behavior. In fact, I would assume someone with your rapport in the community would act (again) more professionally, or at least in a civilized manner.

Again, I am using this forum for very specific reasons. One of which is the ability to remove toxicity, such as personal attack vectors, and blatant disrespect such as that coming from you.

I really hope the best for you, and your project, however, you are setting an extremely poor example, and demonstration of character.

Take care,

19

Well, when you find your investment and project you’ve been learning on, not following the explicit federal laws in the USA, and all I met with is disrespect? Yeah, it is a little upsetting. Because this is the exact reason why I have had several issues inside this community.

Anything that does not align, is met with this type of response. No rational individual is able to make any progress if the community it operates in has communicative practices such as these. It’s extremely unprofessional at the very least.

I have been in this ecosystem since Genesis, and I have held an 8-year neuron for over a year. It only continues… Then when I attempt to present explicit federal laws and show how the IC is currently breaking them. Then I am met with “this is subjective”, “you want to censor us”, or “you want to destroy the IC”.

No, this is not what I want, however, you cannot claim to serve the global community, then in the terms and conditions have stated that they operate according to the laws of the area, and then NOT follow those laws. It IS a direct violation. I’m not sure why/ how this is met with such resistance. IT IS NOT ME making these laws. They are right there though. Will they change? Maybe… Right now, however, it is explicitly stated. If they do not geo-block the USA, OR file for the proper registrations the developing team would be operating, running, and providing an unregistered exchange service. This is (right now) against the rules.

They can continue the project and offer it to any other community. However, if they want to serve the US community these are the rules. Again, I’m disappointed by this, and really want these services. However, if they do not follow the rules now, and are fined/ charged they will not be able to operate afterward.

These DEXs are obviously unregistered exchanges operating and providing services inside the USA without proper licensing and (or) being a registered exchange. They are directly opening their investors and their end-users up to several violations. Which again, would fall on the developing team and the project be obsolete anyways.

I’m not understanding how these basic business practices can be sidestepped with loose interpretations of explicit rules and regulations.

21

I don’t know what to say other than you are obviously not reading the federal laws, rules, and regulations I just provided. I’m not sure an accountant is what would help you in these situations. The developing teams will need to retain legal counsel, not an accountant.

I’ll end the conversation between us, by urging you to actually read the material (I’ll add more).

Then I will be disengaging from the conversation between the two of us. Furthermore, I will only dignify a response to any individual willing to engage in respectful and constructive dialogue such as @jwarner has on several occasions (for example).

22

like with somebody that have the same…" I can see the future " powers like you ? :slight_smile:

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24

I believe this discussion should be concluded and locked.

If the OP is keen on implementing GEO blocking for DEX’s, he should directly approach the platforms. It’s not Dfinity’s responsibility to enforce geo-blocking, at least not until there’s an official government mandate.

25

@jsull9, firstly you make a case with an implied assumption, which is that all protocol tokens are American securities. That is a debate that is currently raging between the crypto industry and regulators, and many people expect this will take significant time to resolve – even though the SEC has taken a position, it remains highly controversial, even among their own commissioners and ex-staff.

One important industry view, is that tokens which do not derive value from a “common enterprise” (like FTT), but are instead created by a decentralized protocol, that forms a decentralized ecosystem that creates value, are not securities, but digital commodities. Many people would question whether a digitally-formed decentralized ecosystem/economy is the same thing as a common enterprise. Such tokens certainly do not grant legal rights or claims in the mode of an “investment contract,” and even their purpose evolves with the protocol, so nothing is guaranteed. This does not look like any security ever seen or litigated before, and reflects why new legislation is needed for digital assets rather than enforcement actions.

You fail to acknowledge the above debate is occurring and that questions exist.

Secondly, you present the Roche Freedman lawsuit, as though that securities action is indicative that your case is correct. However, this was based on the Arkham ICP Report, which has been shown to be professional defamation, and the lawsuit itself was apparently created in furtherance of the aims of Ava Labs (Avalanche), who financed them, to harm a disruptive competitive threat. The lawyers involved have been kicked off the very class action they created (their class action currently doesn’t have a lawyer prosecuting it) and they are now being kicked off nearly all their other cases because of what their founder Kyle Roche revealed. I wonder why you support them in this way? The background is on the investigative journalism website, CryptoLeaks.info.

You further list whistleblower lines for the SEC and CFTC, which gives the impression of making a threat or encouraging others to join you in asking those guys to come after the ecosystem. Can you give some more color on your purpose there, because if feels like FUD?

However, I recognize you might be well intentioned and allow benefit of doubt –

Basic questions:

  1. Are you advocating that the DeFi on other blockchains like Ethereum, Solana, Avalanche et al also geo-block US citizens somehow?

  2. If 1=yes, are you advocating that American citizens be denied access to all DeFi?

  3. If 1=no, why not?

Next:

Currently the Internet Computer network does not provide canister smart contracts with a way to geo-block different jurisdictions:

  1. Are you suggesting that the web UX of DeFi projects detect the location of the user, by asking for their location from the web browser, and act accordingly? This would degrade the user experience worse than the Accept Cookies dialog, since the user will be asked for the permission, and sometimes to update their system settings, and a lot of people will be alarmed Or;

  2. are you suggesting that the Internet Computer network should provide the country of a web user (derived from the IP address they use to interact with the boundary node) to canister smart contracts so they can make regulatory decisions (this feature is already being discussed)? A downside of this is that smart contracts could discriminate against users based on their location.

i.e. what are you precisely advocating for?

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