In today's turbulent regulatory environment, centralized exchanges have been hit hard, and whether decentralized exchanges (DEX) can take advantage of the situation has become a focus of attention. With the booming cryptocurrency market, DEX, as a decentralized trading platform, has gradually become more prominent. This article will explore in depth the development prospects of DEX and possible countermeasures under regulatory challenges.

In the regulatory storm, centralized exchanges are the first to bear the brunt. Traditional centralized exchanges are more likely to be concerned and intervened by regulators due to their centralized characteristics. Trading platforms for cryptocurrencies such as Bitcoin and Ethereum have frequently become the focus of regulation, involving issues such as fund security and anti-money laundering. In this context, decentralized exchanges, as a new trading model, have attracted much attention from the market.

As a decentralized trading platform, the biggest feature of DEX exchanges is that there is no need to trust third parties. Users can trade directly on the blockchain to achieve safe exchange of assets. This model avoids the potential financial security risks of centralized exchanges, and users have greater control over transactions. For example, DEX platforms such as Uniswap and SushiSwap realize the automated exchange of funds through smart contracts, providing users with a safer and more transparent trading environment.

Under the regulatory storm, DEX exchanges also face a series of challenges. The first is the issue of regulatory compliance. Due to the anonymity and decentralization of DEX, it is difficult for regulators to effectively regulate it. In addition, DEX platforms also have problems such as insufficient liquidity and poor trading experience, which limit their development in the market. However, with the continuous advancement of technology and the standardization of the industry, DEX exchanges are expected to gradually overcome these challenges.

In order to survive and develop in the regulatory storm, DEX exchanges can adopt a series of strategies. The first is to strengthen compliance construction, cooperate with regulators, establish risk control mechanisms, and enhance the transparency and legality of the platform. The second is to optimize user experience, improve transaction speed and liquidity, and attract more users to participate. In addition, DEX platforms can also continue to expand their market share by introducing diversified trading varieties and innovative trading functions.

In general, under the regulatory storm, DEX exchanges face many challenges, but also contain huge development opportunities. As a new trading model, DEX has the advantages of decentralization and high security, and is expected to become the mainstream form of cryptocurrency trading in the future. With the gradual improvement of the regulatory environment and the continuous growth of market demand, I believe that DEX exchanges will take advantage of the wind and become a new force in the cryptocurrency market.

In 2019, US regulators, which had generally taken a wait-and-see attitude in the past, began to gradually exert their strength. In June and July, many centralized crypto exchanges felt the pressure of regulation and continued to take action. At the same time, decentralized exchanges, due to their small scale and late start, seem to still be outside the vision of regulators. Some people can't help but ask, will the increasingly severe regulatory situation be a favorable wind for decentralized exchanges to gain more market share?

With the strengthening of supervision, centralized exchanges are facing a compliance storm

BitMEX and Bitfinex are currently under investigation for providing services to US users. According to Coindesk
July 19, Seychelles-based BitMEX is under investigation by the US Commodity Futures Trading Commission (CFTC). According to data, the cryptocurrency exchange Bitmex saw an outflow of $73 million worth of Bitcoin in 24 hours.

According to Coindesk
July 10, the New York Attorney General's Office (NYAG) recently submitted a report detailing Bitfinex and Tether's suspected issuance of illegal trading securities as unregistered securities operators in New York State. According to the NYAG, Bitfinex and Tether issued unsecured "loans" to certain investors, questioning the claim that each Tether stablecoin is backed 1:1 by the U.S. dollar in a reserve account. The NYAG's hearing on Tether's investigation will be held on July 29.

Although other exchanges have not been investigated, they are also "hedging" for regulatory reasons. Many exchanges have announced that they will suspend trading of some tokens to U.S. users. Crypto exchange Bittrex
issued an official announcement on June 8 that from June 21, some markets will no longer be open to U.S. customers and will transition to Bittrex International. Cryptocurrency exchange Poloniex
Even earlier, on May 17, it announced that it would stop providing 9 cryptocurrency trading to U.S. users on the grounds that these tokens may be defined as securities by U.S. regulations.

Domestic head exchanges are no exception. , has always emphasized in its terms of service that it does not provide services to U.S. users. It also issued an announcement on June 14 that "it will continue to conduct compliance checks on user accounts" and will eventually completely stop providing currency trading services to U.S. users and instead use .us to serve U.S. users.

Can DEX take off?

Although BitMEX and Bitfinex both claim that they prohibit US users from accessing, it is obviously useless to simply block US IPs. In fact, due to the lack of strict implementation of KYC, using VPN to log in to the exchange has become a daily routine for many users. Comprehensive and strict KYC is required to eliminate non-compliant users from the source, which is also an important compliance requirement that regulators pay attention to.

In many centralized exchanges, users need to undergo KYC certification before they can trade, and they often cannot trade if they fail KYC. If BitMEX conducts comprehensive KYC on users, it can naturally avoid allowing users with US identity information to participate in transactions. So, for users who do not meet the KYC requirements of centralized exchanges or do not want to do KYC, will DEX give people "opportunities to take advantage of"?

First of all, we need to understand the difference between centralized exchanges and DEX in KYC. The decentralized exchange Newdex told Babbitt that centralized exchanges require users to deposit and withdraw assets, which is equivalent to the platform directly storing user assets. In principle, KYC should be where the user assets are.

"The DEX platform itself does not store user assets, nor does it have its own account system. If the wallet has done KYC, then DEX is directly embedded, which can fully take into account asset security and user experience."

In other words, the user's KYC is actually handed over to the wallet. But in fact, many wallet providers currently do not perform KYC on users. Therefore, based on the current situation, users can indeed bypass the KYC problem by turning to DEX, and some users who do not want KYC may indeed flow to DEX.

So, in the context of strengthened supervision, if the KYC problem of DEX is not effectively solved in the short term, will centralized exchanges face greater threats from DEX? In this regard, Xu Kun, vice president of strategy at OK, believes that compliance is an inevitable trend and has nothing to do with centralization. Which model will be better in the future is still determined by market demand.

She said: "Compliance and non-compliance, centralization and decentralization are two different dimensions and cannot be confused. Compliance is an inevitable trend, but the field of encrypted digital assets is very new and changes very quickly, and regulators are also moving forward in exploration. From the perspective of business model, centralization and decentralization each have their own advantages. At present, centralized trading platforms are more efficient and easier to use, but which model will eventually dominate is determined by market demand."

Decentralized exchange Newdex also believes that compliance is the general trend. Newdex is also actively promoting the improvement of KYC processes with cooperative wallets. Decentralized trading still needs to embrace supervision. At the same time, DEX still needs to rely on its own technological development to gain more market share.

"For Dex, the biggest development opportunity is still based on its own technological development, breaking through the problem that existing DEX cannot meet user trading needs and has weak trading depth."

In general, although compliance seems to bring more potential users to DEX, what everyone really wants to compete with is user experience and market demand. The iron still has to be hard.

The four most famous international exchanges:

Binance INTL	OKX INTL	Gate.io INTL	Huobi INTL
China Line　APP DL	China Line　APP DL	China Line　APP DL	China Line　APP DL

Note: The above exchange logo is the official website registration link, and the text is the APP download link.