This article was first published on Polymath Network - Medium
The objectives of most securities regulators is to provide protection to investors from unfair and fraudulent practices, foster fair and efficient capital markets, and contribute to the stability of the financial system and the reduction of systemic risk to facilitate capital formation. In order to fulfill their mandate, securities regulators not only require issuers to provide fulsome public disclosure and reporting but also require participants to validate customer identities through Know-Your-Client (KYC) obligations.
For general-purpose blockchains, meeting regulatory requirements, like knowing who someone is, runs counter to core aspects of blockchain ethos, particularly pseudonymity and censorship. And while identity solutions can be added, they come in the form of layer-2 add-ons, creating additional complexity in the end-to-end solution. Polymesh, on the other hand, is a blockchain built specifically for security tokens–we needed to address major concerns of regulators like identity in the foundation of our solution. Polymesh has identity at the core of the chain; this means a user’s identity on the chain can only be tied to one person, and that one person can only have a single identity. Now, participants on Polymesh can more easily satisfy regulatory standards since tokenholders cannot subvert rules by holding assets under multiple identities. It also makes the chain more resilient and less vulnerable to Sybil attacks.
Today, the most common way financial service providers comply with identification requirements is to have users provide them personal information as verification, usually in the form of government-issued ID. On Polymesh, asset issuers, and other financial intermediaries can examine the Polymesh blockchain to confirm questions about identities without the need to re-identify users. This arrangement is mutually beneficial for all participants because it streamlines the identity verification process and reduces costs for all participants. Issuers and institutions no longer need to re-identify users, and users do ...
To keep reading, please go to the original article at:
Polymath Network - Medium