- Securrency has started a pilot project that simulates a marketplace that complies with the regulations of various international jurisdictions.
- The marketplace uses the Stellar network to process transactions in real time at low cost.
The upcoming SEC lawsuit against Ripple shows that opaque and lack of legal frameworks in the financial industry can block innovation. Although prudent financial market regulation favors a living and competitive ecosystem, the ever faster development of new technologies is placing a constant burden on the regulatory framework and regulatory authorities.
However, in order to create a marketplace that meets the various requirements of international jurisdictions, the IT security company Securrency started a pilot project at the request of securities regulators, which can be flexibly designed and thus adapted to the legal framework conditions of different countries.
The marketplace should have the ability to incorporate rules and regulations into the asset itself, which define the applicable securities regulations, holding periods and exclusions from several jurisdictions. Furthermore, these regulations are to be automated for both primary and secondary cross-border market transactions without the need for further adjustments.
The pilot project relies on the Stellar Lumen Network to process cross-border transfers and implement the legal requirements. Here it is possible for issuers of digital assets to integrate self-executing regulatory guidelines into a specific security token using an intuitive plain text interface. Securrency explains in detail:
It is important that these guidelines are machine-readable representations of securities regulations that are “on-chain” – through an instance of the Securrency guidelines engine built directly into the Stellar Ledger – and “off-chain” at the same time for security and verifiability can be interpreted.
The programmed guidelines can be checked by regulatory authorities worldwide and adapted if necessary. It is not necessary to create and issue a new token, as all regulations in the same token can be changed manually. This adaptability is a key advantage that enables companies and institutions to react quickly to new financial market regulations.
The successful pilot test showed how new tokenized and regulated financial instruments with regulatory guidelines that are taken into account in the respective tokens always comply with international jurisdictions and thus promote innovation instead of leaving a black hole full of ignorance. Securrency summarizes the results as follows:
This is a significant development with massive potential for the digital assets space and the future of finance. As has been shown, the use of an open and interoperable compliance framework can reduce the friction in the market, lower the costs of legal advice and compliance, create more transparency and consistency in the application of certain securities laws, ensure improved regulatory oversight and fraud and market manipulation reduce and expand global access to capital and investment opportunities.
In the coming months, additional functions such as the registration and qualification of investors, custody functions of tokenized securities, a clearing and settlement functionality, the interactions between transfer agents, brokers and other interactions as well as reporting requirements and disclosures will be tested.
More and more companies are relying on Stellar Blockchain
As Crypto News Flash already reported , the number of companies using the Stellar Blockchain and the XLM Token has risen to over 250 this year. Stellar offers a versatile infrastructure to process cross-border payments cheaply and quickly. Most recently, the Stellar Development Foundation announced the start of the stablecoin USDC on the Stellar Blockchain for February 2021 .