Why Issuance and Investment are Safer on the Polymath Platform
Even though billions of dollars were made buying tokens in Initial Coin Offerings, many of these investments were unsafe.
They were not unsafe in the sense that the values of the coins could drop significantly; they were unsafe because many, if not most, did not adhere to stringent regulations created by the U.S. Securities and Exchanges Commission and their regulatory counterparts globally.
Many ICOs performed very few checks regarding identity. Their Know Your Customer (KYC) process was a simple IP address check to make sure that none of their tokens were being sold to residents of banned jurisdictions like the U.S. and China.
These checks are easy to get around by using a VPN service to change your IP address, which likely means that many tokens were distributed to unauthorized participants.
Not only is it likely that tokens were distributed to residents in barred jurisdictions, but many ICOs have also failed to comply with Anti-Money Laundering (AML) and Counter-Terrorism Funding (CTF) rules.
At best, companies that launched ICOs without complying with these regulations and guidelines were negligent. At worst, these ICOs were illegal.
On the Polymath platform, investors must have their identity and accreditation status validated by a KYC provider. Polymath has partnered with several providers, all of whom specialize in blockchain-based identity verification solutions.
Once you’ve joined Polymath, you can utilize these KYC providers’ services to verify your identity and prove your accreditation status, and you can pay for their services using our native POLY token.
So, how does this all work?
The Polymath platform was created so that securities issuers can launch their tokens in a safe, regulatory-compliant manner.
All tokens created on Polymath will comply with the ST-20 standard we are developing, where regulatory compliance can be enforced by the tokens themselves through smart contracts.
Locational blocks based on jurisdiction prevent participation from residents of banned countries, and the further KYC processes prevent bad actors from taking part in offerings.
These baked-in regulations continue even after the primary issuance. If ST-20 tokens are traded on a secondary exchange, these compliance checks are still done prior to every token transfer to ensure that the intended recipient has been vetted by the KYC provider of the issuing entities’ choice.
This gives issuers the peace of mind they need to safely issue blockchain-based securities, and provides investors with the assurance that they are protected under securities laws.
About Polymath
Polymath Network (Polymath) is a decentralized platform that makes it easy to create security tokens. The Polymath ST-20 standard embeds regulatory requirements into the tokens themselves, restricting trading to verified participants only. The platform simplifies the complex technical challenges of creating a security token and aims to bring the multi-trillion dollar financial securities market to the blockchain.
