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A new hook available<\/a> on an open-source directory for Uniswap V4 hooks is sparking controversy within the crypto community. The hook enables users to be checked for Know Your Customer (KYC) before they can trade on a pool.<\/p>\n Criticizing the hook, a user at X (formerly Twitter) noted<\/a> that the hook opens up the possibility of decentralized finance protocols being whitelisted by regulators:<\/p>\n “As I explained in all my posts for the past year: It starts with \u201ckyc option\u201d for LPs. And then eventually it moves into a \u201cregulator whitelist approved\u201d database hosted offchain. And then non-kyc gets labeled as illegal terrorist money laundering. Stop simping for soyboys.”<\/p><\/blockquote>\n Essentially, a hook is a tool that allows developers to customize a code without altering the main structure of the program. In Uniswap V4, this hook will permit developers to use KYC verification within the decentralized finance protocol. <\/p>\n Financial institutions use KYC procedures to authenticate customer identities and assess associated risks. A primary goal of KYC is to detect money laundering and terrorist financing activities. <\/p>\n The KYC hook was rolled out by a community developer on Uniswap V4’s directory as an opt-in functionality. The KYC verification is carried out by a nonfungible token (NFT). According<\/a> to another X user, the hook is specific for liquidity providers and may be useful for projects that must comply with regulatory requirements in certain jurisdictions:<\/p>\n “Seems like you don’t understand how this works. #1 it’s lp specific. Some projects may want to operate within the legal confines of jurisdiction. #2 hooks can be made by community devs. You’re trashing something that has done more than anyone else for “real defi”.”<\/p><\/blockquote>\n Governments around the world are taking a closer look at DeFi protocols and transactions. Recently, the group of twenty worlds’ largest economies, G20, accepted a crypto regulatory roadmap<\/a> proposed by the International Monetary Fund (IMF) and the Financial Stability Board (FSB) tightening crypto regulations. <\/p>\n Uniswap V4 introduces customizable hooks and is expected to be available in early 2024, with access limited to governance-approved entities.<\/p>\n