The platform of security tokens Polymath, together with the Loopring project, demonstrated the possibilities of regulated exchange of tokenized securities on a decentralized exchange. This is reported by CoinDesk.
According to Polymath, it managed to “successfully” test using the DEX protocol called Loopring, during which only authorized transactions with ST-20 security tokens took place, while unauthorized transactions were not concluded.
The ST-20 standard developed by Polymath is an extended variation of the more general ERC-1400 standard, which allows you to limit transactions in the blockchain. Such tokens can be held and exchanged only if certain criteria are met, Polymath said, adding that during the test the wrapped ETH cryptocurrency was exchanged for the ST-20 standard token called Cammazol.
According to Graeme Moore, vice president of marketing for Polymath, the teams participating in the initiative showed that it is possible to enforce legal requirements when exchanging security tokens, even if it is carried out on a decentralized exchange.
What we are showcasing here is that decentralized exchanges and security token issuers have the ability to maintain compliance through the standardized protocols that Polymath and others have built. And, in fact, security tokens make it easier for issuers to follow regulations, when compared with the legacy capital markets system using paper share certificates.
Vice president of marketing, Polymath
Describing how it works, Polymath said that every time a trade is attempted, the token calls its transfer manager module and effectively asks, “Can this trade be executed?” The transfer manager then checks a whitelist (controlled by the token issuer) to see if the buyer and the seller are allowed to trade the token. Only if the answer is yes is the trade executed.
Loopring’s focus on user experience with their protocol was a great match for Polymath powered ST20 tokens which support an enhanced feature set on top of ERC20 to allow transfers to be fully validated before execution.
Director of technology, Polymath
Polymath is company, dealing with securities tokenizations.