Noncustodial cryptocurrency exchange ShapeShift announced today the integration of nearly a dozen decentralized exchange, or DEX, protocols — a move designed to relieve both the company as well as users of Know Your Customer burdens while simultaneously offering traders superior liquidity, pricing, asset availability and security.
Prior to the integrations, ShapeShift required users to undergo a KYC process in order for the company to remain legally compliant, as the exchange served as a counterparty to user trades. ShapeShift CEO Erik Voorhees said that regulated services will continue operating on assets that are not currently available through DEXes, such as native Bitcoin (BTC), but that “all non-DEX trading on ShapeShift will be retired” later in the year.
“By integrating our users directly to DEX trading, it means we are no longer part of the trade; we are not a custodian, a counterparty, or an intermediary of any kind at any step of the process,” said Voorhees. “Thus, we are purely a software technology company, and in this capacity we are not regulated because we are not engaged in a regulated activity.”
According to Voorhees, newly supported DEXes include popular decentralized finance protocols “Uniswap, Balancer, Curve, Bancor, Kyber, 0x, mStable,” as well as a half dozen others. Additionally, the list of integrations “will continue to expand as DEX technology permits.”
The move from ShapeShift is part of a wider trend of exchanges, wallets and other crypto services providing access to DeFi platforms — a movement, according to Voorhees, born of the maturation of a DeFi ecosystem that is “rapidly becoming superior to the status quo.”
Voorhees noted, however, that he is suspicious of “centralized, custodial services” offering on-ramps to DeFi, also known as “CeDeFi” — a phenomenon Voorhees thinks will be short-lived.
“They are incompatible, because they have to censor users and put up access controls. For example, a centralized exchange in Venezuela is restricted by capital controls, while DeFi is not (a decentralized protocol operates exactly the same in Venezuela as anywhere else).”
By contrast, Voorhees argued that noncustodial services like ShapeShift are a more natural fit for DeFi integrations, and as such, these initial DEX integrations might also be the foundation for a wider series of onramps to more varied DeFi products — including, hinted Voorhees, a decentralized Bitcoin exchange service.
In the end, providing these services to users is not a perk but instead a market reality.
“Two or three years ago, decentralized trading existed, but was not liquid or easy enough to be compelling at scale,” he said.
“That has changed, and as the industry evolves, so must we—we must always be working in the interests of our users and toward the advancement of self-sovereign finance.”