Lawyers for Decentralized Exchanges - Federal Lawyer
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Lawyers for Decentralized Exchanges

Dedicated Team in Decentralized Exchanges

Do need updates for decentralized exchanges for your business? Are you worried about the lack of intermediaries with decentralized exchanges and want to know if transacting on a decentralized exchange would truly be good for you, especially compared to a centralized exchange?

If so, then you need the legal advice of a blockchain attorney experienced in decentralized exchanges. Decentralized exchanges are a new creature for engaging in crypto transactions.

While still trailing centralized exchanges in terms of usage and popularity, decentralized exchanges are unique in their ability to give users complete control and custody of their funds and of their private keys.

Because of this, many federal agencies see decentralized agencies as a conduit for fraudulent activity that can easily evade federal scrutiny. This puts an unnecessary pressure on individuals and businesses seeking to expand by using decentralized exchanges.

If you need legal advice either in defending against pending or suspected federal investigations or simply would like a legal opinion on the fit of using decentralized exchanges for your business, give us a call today.

At Oberheiden, P.C., our team of blockchain attorneys always stays up-to-date of legal and regulatory changes affecting online crypto exchanges—whether centralized or decentralized.

We can do the same for you in a way that makes you feel secure against a possible federal investigation and confident that you are using the best online exchange for your needs.

Call or contact us today for a free consultation to get the assurance you need.

Put our highly experienced team on your side

Dr. Nick Oberheiden
Dr. Nick Oberheiden

Founder

Attorney-at-Law

John W. Sellers
John W. Sellers

Former Senior Trial Attorney
U.S. Department of Justice

Local Counsel

Joanne Fine DeLena
Joanne Fine DeLena

Former Assistant U.S. Attorney

Local Counsel

Joe Brown
Joe Brown

Former U.S. Attorney & Former District Attorney

Local Trial & Defense Counsel

Amanda Marshall
Amanda Marshall

Former U.S. Attorney

Local Counsel

Aaron L. Wiley
Aaron L. Wiley

Former Federal Prosecutor

Local Counsel

Roger Bach
Roger Bach

Former Special Agent (OIG)

Michael Koslow
Michael Koslow

Former Supervisory Special Agent (FBI)

Chris Quick
Chris Quick

Former Special Agent (FBI & IRS-CI)

Kevin M. Sheridan
Kevin M. Sheridan

Former Special Agent (FBI)

Ray Yuen
Ray Yuen

Former Supervisory Special Agent (FBI)

Dennis A. Wichern
Dennis A. Wichern

Former Special Agent-in-Charge (DEA)

What are Decentralized Exchanges?

Decentralized exchanges (“DEXs”) are online trading platforms that do not use third-party intermediaries. They instead allow for users to engage in trading activities by executing trades via smart contracts.

Unlike centralized exchanges, decentralized exchanges do not act as custodians of your funds and do not hold your private keys.

As a result, decentralized exchanges are unregulated and offer little recourse to users of these exchanges.

Decentralized exchanges do not allow individuals to use fiat currencies and are instead focused on crypto-to-crypto transactions over peer-to-peer networks. With decentralized exchanges, users maintain full control over their funds.

Lastly, because of the lack of regulations and legislative guidance coupled with significant user control over funds, federal agencies struggle to investigate decentralized exchanges for fraud and market abuse.

Decentralized Exchanges and Peer-to-Peer Networks

Decentralized exchanges use peer-to-peer networks to facilitate crypto trading as opposed to using third-party intermediaries like centralized exchanges.

With centralized exchanges, the exchange would connect the buyer of cryptocurrencies with the seller. But over time, several disadvantages of centralized exchanges were identified.

To start, centralized exchanges are owned and operated by a private third party. This intermediary oversees every transaction. It can never be guaranteed that this intermediary is independent.

The role of these intermediaries with centralized exchanges are to oversee transactions, store customer details, and serve a custodial role. Many individuals severely disliked the ability of a third party to see all their transactions.

Decentralized exchanges fix many of these problems. Most important, they remove the need for third-party intermediaries and replace them with peer-to-peer networks.

Also, the decentralized exchange does not store user assets or serve any custodial role. It is the individual users that maintain full custody of their assets and private keys.

The peer-to-peer networks allow users to directly transact with one another. As mentioned, these transactions do not use third parties but instead rely on the automatic execution of smart contracts.

Smart contracts contain a pre-written code—a set of conditions that will automatically execute upon the occurrence or non-occurrence of a predefined event.

Because there is no central authority overseeing transactions and managing custody, it is each individual user’s responsibility ensure that their wallets are secure.

Using Decentralized Exchanges

Decentralized exchanges do not have the same extensive sign-up process as centralized exchanges by any means. In fact, decentralized exchanges do not have sign-up procedures in order to use the platform.

The first step is for the individual user to decide which kind of decentralized exchange network they want to use.

All individuals need is a wallet that will work with the smart contract used on the decentralized exchange. The wallet chosen must be compatible with the exchange and the token. After that, the wallet must be funded with the selected tokens, and the users can engage in peer-to-peer trading.

In summary, anyone with an internet connection and smartphone can take advantage of decentralized exchanges.

Regulating Decentralized Exchanges

Decentralized exchanges remain a significant regulatory burden for federal agencies such as the SEC.

All control over transactions and user funds is placed in the hands of the individual users on the exchange, which is something federal agencies are not keen on promoting.

In fact, many federal agencies believe that decentralized exchanges ought to be regulated just as centralized exchanges.

However, decentralized exchanges respond by noting that they differ significantly from centralized exchanges. For instance, decentralized exchanges do not fulfil broker functions or custodial duties over customer funds.

Only time will tell whether further regulations will be imposed on decentralized exchanges—either the same, similar to, or different from centralized exchanges, assuming regulation is needed in the first instance.

Examples of Decentralized Exchanges

An example of a decentralized exchange is Exodus. Exodus is a decentralized online cryptocurrency platform that facilitates peer-to-peer trading.

Exodus’ exchange platform does not track user trading activity, does not hold user funds or maintain custody, and does not oversee transactions.

The transactions supported by Exodus include an unlimited trading amount of peer-to-peer crypto-to-crypto trades.

Also, decentralized exchanges such as Exodus do not require that users complete identity verification nor do they require personal information to create an account.

Individual users are responsible for making sure they want to use the particular decentralized exchange. These exchanges are gaining popularity because they offer users more coins to choose from and more control over their assets.

In additional to Exodus, other notable decentralized exchanges include WavesDex, Bancor Protocol, EtherDelta, AirSwap, and Kyper Network. Decentralized exchanges are uninsured.

Advantages of using decentralized exchanges include the ability of users to control their funds as well as the ability to earn rewards for staking.

The disadvantages include high network fees and the inability to withdraw funds to a fiat currency.

Need Advice with Decentralized Exchanges?

Decentralized exchanges are a novel twist to centralized exchanges—offering more control over users’ funds traded on online crypto platforms without the need to rely on third-party intermediaries.

That said, federal agencies are under the impression that decentralized exchanges need to be more closely regulated similar to centralized exchanges. This can create an environment of uncertainty and inconsistency.

At Oberheiden, P.C., we can help you and your business avoid this uncertainty and inconsistency. Our team of blockchain attorneys can advise you on the benefits and drawbacks of decentralized exchanges, let you know what the future regulatory landscape looks like, and defend you against unwarranted federal accusations.

Let us work for you. Call or contact us today online or over the phone for a free consultation.

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