Jul 26, 2023

The Evolution of Securrency: Revolutionizing Compliance in DeFi and Beyond

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Securrency, a company specializing in compliant tokenization, has carved out a prominent niche in the regulated digital asset space since its inception in 2015. As part of their broader technology stack, their end-to-end infrastructure is designed to facilitate the seamless transfer of value while ensuring stringent compliance.

Building a Universal Compliance Framework

Initially, Securrency's primary focus was on tokenizing assets and incorporating smart contracts and compliance logic. Their goal was to automate compliance and business functions, with compliance being identified as the key to liquidity. This approach was critical in facilitating the movement of assets across different institutional environments, all the while adhering to jurisdiction-specific regulations.

Securrency recognized that assets such as payments and securities were treated differently and could transition between categories in different contexts. Therefore, real-time compliance that seamlessly crosses borders became a priority for them.

Focusing on Ledger Agnosticism and Interoperability 

Additionally, Securrency emphasized ledger agnosticism, acknowledging that different blockchains were preferable in various situations. Interoperability was vital, resulting in the development of a layer 3 infrastructure solution. They also offered a white-label implementation of their infrastructure, catering to both institutional and smaller brokerage needs. Their vision was to create a "global liquidity network," connecting diverse platforms and facilitating transactions.

Securrency was ahead of its time in its strategic positioning, focusing on institutional-grade compliance solutions while the market was dominated by ICOs in 2016 and 2017. They anticipated the convergence of the institutional and DeFi worlds, positioning themselves at the intersection of these realms.

Securrency and the Future of DeFi 

As institutions begin to adopt decentralized finance (DeFi) using permissioned blockchains due to regulatory concerns, Securrency's framework accommodates both permissioned and permissionless systems. They aim to address regulatory challenges by facilitating interoperability between decentralized networks and traditional systems.

Securrency's product, Composer, enables real-time pricing and compliance automation for DeFi, aiming to create a unified data source. Their constructive dialogue with regulators aims to further progress the industry, as institutions recognize the cost savings and automation potential of tokenized assets and smart contracts. 

Anticipating Market Trends and Institutional Adoption

Securrency foresees the asset class that will drive institutional adoption of tokenization in DeFi hinging on robust infrastructure support. Tokenized public funds and trade finance are promising drivers, given their established presence, multiple roles, and fragmentation. However, the lack of a core global pricing and compliance infrastructure continues to hinder real estate tokenization projects.

Introducing the Compliance Aware Token® Framework

Securrency's innovative token framework, combines on-chain and off-chain elements to ensure compliance. This system simplifies the process by focusing on participants' credentials and assets' policies, evaluates them during onboarding, and maps them to a wallet. The compliance Oracle then checks these credentials when a transaction is proposed and decides whether the transaction should proceed.

The off-chain policy instance reduces reconciliation risks and facilitates auditing for regulators and compliance officers. It's interoperable across multiple ledgers and legacy systems, aligns with the recognition of convergence between markets and products by regulatory authorities, and goes beyond credential verification.

Securrency has engaged extensively with regulators worldwide to showcase the Compliance Aware Token® Framework's capabilities. This proactive engagement demonstrates that such a framework is not a distant future possibility but a practical solution that removes existing barriers and provides infrastructure for massive adoption. It's flexible and can be used by institutions, individual brokers, and issuers at various levels, reinforcing Securrency's commitment to compliant tokenization and a more efficient future for digital asset management.

Coinchange Research Team along with Securrency team has written a long form research report titled, “Institutional DeFi in 2023, Regenerative Finance (ReFi): fostering adoption through blockchain innovation”. You can download a copy of the report here.

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