UPDATED | November 2, 2018:
Yesterday, November 1, 2018, IDEX released a Medium post declaring its new approach to regulations, called "pragmatic decentralization." Calling decentralization a "platitude," it says it's just one tool it's using to create an exchange that is transparent and auditable and can be operated by the businesses and consumers who use it.
The company has already blocked IP addresses in New York, North Korea, and Iran. Washington state will be added to that list, as will Cuba, Syria, and Crimea. The company will also be "implementing KYC/AML policies in order to comply with sanctions and money laundering laws."
ORIGINAL | October 24, 2018:
Aurora, which identifies itself as a decentralized crypto-banking platform, tweeted yesterday that its IDEX exchange will start to block orders from New York users on Thursday, October 25. Although the company has not officially announced why it will block the state's IP addresses, New York is known for its BitLicense regulatory framework, which outlines stringent requirements for cryptocurrency businesses to operate there. Some sources say the exchange has admitted to not being compliant with the state's regulations.
The platform's announcement has caused a minor stir in the cryptospace, as many assert that this action means the exchange is not really decentralized. Larry Cermak, head of analysis at The Block newsletter, responded to the apparent contradiction:
Cermak advocates that people "should put pressure on the 'decentralized' exchanges to change the language and their marketing." Further, he referenced an article titled "The Death of 'Decentralization,'" which explores the reduction of the term "to a marketing buzzword." The rampant misuse of the word, the article continues, has contributed to its loss of meaning.
Crypto analyst and investor Joseph Young also broached the question, "To what extent are decentralized crypto exchanges decentralized?" Young maintains that these so-called decentralized exchanges are not that decentralized because of examples like IDEX, which feature institutional intervention, a quality antithetical to the concept of decentralization. He continued, "Merely settling trade orders on Ethereum [does not equal] decentralized."
Other projects, such as 0x, attempt to provide a more decentralized experience; its exchange model utilizes relayers, though because these intermediary entities host and sort order databases, it could be argued that the model is not truly decentralized. But decentralization is a nebulous term that includes multiple components – a project can certainly be part centralized, part decentralized.
In an industry where transparency is almost universally valued, it makes sense for folks like Cermak and Young to criticize a self-proclaimed decentralized entity for its not-so-decentralized actions. The core of the issue, then, is not that IDEX made a faux pas but rather that decentralization is not a catch-all term, and its use should be monitored.