- Staff cuts in various agencies mean regulators may turn to automated tools.
- A new pilot from Legion offers up one such idea.
- The Pathfinder sandbox comes as key market structure rules are being hashed out.
A version of this story appeared in The Guidance newsletter on September 15. Sign up here.
Hey all, Liam here!
Massive staff cuts at government agencies this spring have many scrambling to figure out how to regulate a booming crypto industry.
Some suggested the use of artificial intelligence, as well as analytics products from companies like TRM Labs and Chainalysis.
Legion, a new token launching platform, has another idea – and it’s hoping the Securities and Exchange Commission is keen on trying it out.
As part of a 12-month pilot programme called Pathfinder, Legion’s co-founder, Matthew O’Connor, is pitching an automated disclosure system that converts raw blockchain data into compliance reports for upcoming crypto projects.
O’Connor shared an exclusive look at how the programme would work.
For instance, the “Post-TGE Automated Disclosure System,” a tool for monitoring what happens after a token generation event, would detect token sales by team members, unauthorised minting of additional tokens, as well as changes to a project’s governance structure made without proper authorisation.
If triggered, users who participated in the TGE would be immediately notified via email and public dashboards. Additionally, depending on the project’s integrations, API endpoints would also be notified.
It’s a breath of fresh air for those in the crypto industry. New token projects have exhibited some of the most scandalous behaviour over the years, leaving many investors high and dry.
And O’Connor is hoping it will even inform how upcoming market structure bills are devised.
Pilot programmes, sandboxes, and experimental environments can make writing complex laws for the industry, such as Europe’s sweeping Markets in Crypto-Assets framework, much easier.
“MiCA is a good example of a regulation that gets some things right, but other things don’t work perfectly in practice,” he told DL News. “There was little to no trials ahead of time that would have detected that and made it easier to adapt.”
Pathfinder, after all, would be a safe space for crypto companies to experiment and explore each of these tools.
It would also provide the SEC with an inside look at a live environment, allowing them to understand how these initial coin offerings work.
So far, the agency’s response to the idea has been positive, O’Connor told DL News.
“There have been positive responses as indicated by continuing conversations with members of the task force, but these things take time of course,” he said.
Liam Kelly is a DeFi Correspondent at DL News. Got a tip? Email at liam@dlnews.com.