The Global Layer One (GL1) has published two toolkits to help with the development and adoption of regulated tokenized asset networks. Euroclear and four systemically important banks participated: HSBC, Kinexys by JP Morgan, MUFG and Societe Generale FORGE. The group also includes the central banks of England, France and Singapore. The toolkits are for market infrastructure controls and programmable compliance.
When the Monetary Authority of Singapore (MAS) first unveiled the GL1 two years ago, it intended to develop a regulatory compliant ledger, similar to the Unified Ledger concept. Since then, the goal has morphed into creating an ecosystem of compatible and interoperable platforms around the world. So rather than building a network itself, it is developing standards and the ecosystem.
The Programmable Compliance toolkit looks at the top level processes involved in on-chain compliance. A key feature is a policy wrapper, a smart contract that is separate from the underlying token. This means the same token could have a different policy wrapper depending on the relevant jurisdictions. The idea is inspired by the MAS’s Purpose Bound Money and the BIS Project Mandala. The toolkit likens the wrapper to preparing a package to send internationally via a courier. Proofs of compliance are attached to the transaction and verified by the wrapper.
The policy wrapper works alongside an on-chain smart contract that provides orchestration – the policy manager. In addition to interacting with the policy wrapper, the policy manager interfaces with identity solutions with both offline components (personal information) and online elements (wallet addresses and credentials). The policy manager also interfaces with compliance rule engines, which are most likely to be offline because existing systems are cheaper to operate off-chain. The toolkit provides some examples from Project Guardian.
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