Polymesh Pillar Series Part 2: Compliance on Polymesh

This article was first published on Polymath Network - Medium

As compliance requirements continue to evolve, participants in the space have needed to put in place increasingly complicated, often-proprietary systems to remain compliant. While these systems may add elements of automation to complex compliance rules, they still require manual intervention making them far from the end-to-end automation that’s needed to deal with a convoluted process of complying with regulations in multiple jurisdictions. The nature of this ineffective automation passes along the costs to all participants, making them inefficient as well.

In addition to a lack of automation, current approaches to compliance on general-purpose blockchains are unable to deploy a complex compliance framework due to higher and higher computing costs. For example, general-purpose chains like Ethereum rely on layer-2 solutions built on top of the chain to implement these complex frameworks. As users begin to layer on successive rules for their compliance, the number and complexity of such rules pushes the chain to its computational limits, driving up costs and processing time.

Polymesh addresses these challenges by having Compliance built into the core of the chain, providing comprehensive automation to check the rules configured into the token, enabling faster processing and lower protocol fees. Once security token rules are set by the issuer, the chain ensures they are checked, and most importantly must be met, before a transfer can be completed. Issuers no longer need to approve things like individual transfers involving their token through manual or semi-automated means; with Compliance on Polymesh, compliance management is built into the security token. Now, any action that meets the rules set by the issuer can proceed, expanding the range of activities that can occur, ultimately increasing the investor pool and liquidity available to the issuer.

Compliance on Polymesh will also apply to corporate actions in the token lifecycle like elections and entitlements, though these use ...

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