KYC hook for Uniswap v4 stirs community controversy

A caller hook available connected an open-source directory for Uniswap V4 hooks is sparking contention wrong the crypto community. The hook enables users to beryllium checked for Know Your Customer (KYC) earlier they tin commercialized connected a pool.

Criticizing the hook, a idiosyncratic astatine X (formerly Twitter) noted that the hook opens up the anticipation of decentralized concern protocols being whitelisted by regulators:

"As I explained successful each my posts for the past year: It starts with “kyc option” for LPs. And past yet it moves into a “regulator whitelist approved” database hosted offchain. And past non-kyc gets labeled arsenic amerciable violent wealth laundering. Stop simping for soyboys."

Essentially, a hook is simply a instrumentality that allows developers to customize a codification without altering the main operation of the program. In Uniswap V4, this hook volition licence developers to usage KYC verification wrong the decentralized concern protocol.

Financial institutions usage KYC procedures to authenticate lawsuit identities and measure associated risks. A superior extremity of KYC is to observe wealth laundering and violent financing activities.

KYC hook codification disposable connected GitHub. Source: GitHub

The KYC hook was rolled retired by a assemblage developer connected Uniswap V4's directory arsenic an opt-in functionality. The KYC verification is carried retired by a nonfungible token (NFT). According to different X user, the hook is circumstantial for liquidity providers and whitethorn beryllium utile for projects that indispensable comply with regulatory requirements successful definite jurisdictions:

"Seems similar you don't recognize however this works. #1 it's lp specific. Some projects whitethorn privation to run wrong the ineligible confines of jurisdiction. #2 hooks tin beryllium made by assemblage devs. You're trashing thing that has done much than anyone other for "real defi"."

Governments astir the satellite are taking a person look astatine DeFi protocols and transactions. Recently, the radical of 20 worlds' largest economies, G20, accepted a crypto regulatory roadmap projected by the International Monetary Fund (IMF) and the Financial Stability Board (FSB) tightening crypto regulations.

Uniswap V4 introduces customizable hooks and is expected to beryllium disposable successful aboriginal 2024, with entree constricted to governance-approved entities.

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