- Oxford University’s Faculty of Law criticized DeFi exchange protocol SushiSwap for legal issues.
- SushiSwap token SUSHI could be a security asset.
- Legislators may also consider similar DeFi protocols as securities.
The two-part blog is entitled Big Fish in a Big Pond: Exploring Some Novel and Some Familiar Legal Issues Posed by DeFi and Sushiswap.
The Oxford Law dissected the DeFi subculture and chose SushiSwap as a case study. The blogs specifically discussed the unique characteristics of DeFi, including its legal and compliance issues.
DeFi Token SUSHI a Security?
One serious concern regarding SushiSwap is the possibility of legislators to classify its native token SUSHI as a security asset. This would have “severe effects” on SushiSwap, including its creator Chef Nomi and all other platform and token participants.
If the above scenario plays out, then SushiSwap could be operating an unregistered securities exchange, Oxford Law asserts. As long as SushiSwap facilitates any digital asset exchange including DeFi tokens — which legislators might consider to be securities later on — the exchange could be in for some serious legal trouble.
Oxford Law explained,
If SUSHI or similar tokens are deemed to be securities, this would not only jeopardize those similar projects but also earlier DEXs like Uniswap, which facilitate transactions in those tokens. As a result, securities law questions will almost certainly be confronted by the DeFi ecosystem in some way or another.
Repercussions on DeFi Protocols
This could cause serious repercussions to many DeFi protocols, since many countries have strict laws concerning securities.
For example, the US Financial Crimes Enforcement Network (FinCEN) charged a Bitcoin mixer operator over alleged AML violations. Another is Ripple, which is planning to relocate to more crypto-friendly countries since its lawsuit regarding the issuance of its native asset XRP, which US authorities consider as a security.
Meanwhile, this is not the first time that SushiSwap has received criticism from various communities. A month ago, researchers showed a number of security flaws in the platform.