(Bloomberg) -- The cryptocurrency exchange dYdX, one of the most used DeFi trading platforms, is moving closer to being a fully decentralized project as global regulators increase scrutiny of the digital-asset sector. 

The exchange, which operates in what it describes as a hybrid decentralized model, is starting a testing network that will allow developers to check for glitches before the official launch of the next version of dYdX. The exchange anticipates going live with the revamp in September.

The updated network, which is known as v4, or version four, will seek to remove the role of so-called centralized entities that are currently maintain the exchange’s operations. The exchange depends on dYdX Trading Inc. to manage and match orders and blockchain technology provider StarkWare to handle some transactions data on the Ethereum network. 

“I think the end state for everything in DeFi has to be full decentralization,” Antonio Juliano, founder and chief executive officer of dYdX, said in an interview. “The middle ground doesn’t really work indefinitely.”

Following the upgrade, dYdX Trading Inc. will continue to contribute to software development. DYdX Trading has about 50 employees, who will be paid through funds the company received from previous funding and trading fees. DYdX doesn’t operate in the US.

The goal of decentralized finance, or DeFi, is to let people trade, lend and borrow via apps without intermediaries and often anonymously through the use of automated protocols. Still, questions have been raised whether many of the protocols are really under the control of specific parties. That’s become more of an issue with US Securities and Exchange Commission Chairman Gary Gensler saying recently that most cryptocurrencies appear to be securities and those that facilitate transactions need to comply with agency registration guidelines. 

Last week, crypto exchange Coinbase Global Inc. disclosed that it received a notice from the SEC declaring the regulator’s plans to bring an enforcement action. The decentralized autonomous organization Sushi DAO said it was subpoenaed by the SEC without saying why. Given Coinbase’s situation, Juliano said that a lot of crypto companies have given up on actively engaging with regulators in the US.

The overhaul was first announced in January 2022, but was delayed for months. At that time, the project also revealed an agreement between dYdX Trading, the nonprofit dYdX Foundation and private investors to postpone the release of some dYdX tokens. The exchange’s namesake token is mainly used for trading fee discounts and project’s governance votes. 

(Adds in the fifth paragraph that dYdX doesn’t operate in the US.)

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