Decentralized exchanges or DEXes are a subset of decentralized finance protocols that enable users to trade in cryptocurrencies and tokens without a central organizing body.
Whilst centralized exchanges rely on their compliance departments and Money Laundering Reporting Officer (MLRO) to counter fraud, deploy AML/KYC/CFT checks and maintain proper risk management procedures – DEXs rely on in-built code to maintain the integrity of the protocol.
Currently, there are little to no clear regulatory laws & directives governing DEXs and thus they are open to abuse by malicious actors, terrorist financiers and money launderers.
During 2020, decentralized exchanges experienced rapid growth in usage, a 2000% increase of Total Value Locked or ‘TVL’ and in October of the same year, the largest DEX at the time, Uniswap, overtook the largest centralized exchange at the time, Coinbase, in monthly volume.
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