This article was first published on Polymath Network - Medium
An essential feature of the current capital markets ecosystem is ensuring that private transactional information (who holds a security and how much they hold) remains confidential at all times. This is where one of the key challenges with public, general-purpose blockchains comes into play — anyone can see the contents or holdings of any public address. And while users can easily have confidential transactions and balances with layer-2 solutions, they come with an unworkable compromise: to add confidentiality, they must sacrifice compliance. For these layer-2 solutions to maintain privacy of transactions, issuers are unable to configure compliance rules or report on ownership. On Polymesh, users are not forced to make the same choice.
Psst. Can you keep a Secret?
Institutions must protect the private and financial information of their clients to comply with privacy requirements and safeguard their financial interests. Today, participants are concerned about the unfair edge provided to algorithmic traders; the worry that these same firms could monitor movements of positions to infer potential trades is even more significant, and one that Confidentiality on Polymesh can protect from. Under these circumstances, securities firms may not be able fulfill large orders without revealing their intention, potentially costing their clients significantly more.
To further complicate the challenges, non-reporting issuers (a fancy name for a private company that does not have to report information to the securities regulator in their jurisdiction) do not want any information that leaks about who owns their shares or how many shares they may own. With a small pool of shareholders, many non-reporting issuers can be left vulnerable to actions affecting the control of a company should their shareholder information become public. The pseudonymous nature of general-purpose blockchains means tokenholders could be discovered and the target of unwanted attention or undue pressure by those looking to influence the security token ...
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Polymath Network - Medium