Impact of regulation on HydraDX OmniPool: use case Alternate Risk Transfer Instruments

# Impact of regulation on HydraDX OmniPool: use case Alternate Risk Transfer Instruments ###### tags: `Hydra` `FCA` `HMT` `PRA` `ILS` `security token` --- ### Research Topic/Question Assessment and classification of regulation and governance as internal and external factors impacting the Hydradx Omnipool AMM Dynamic system. --- ### Brief Description: HydraDX Omnipool AMM has potential application as a liquidity solution in regulated assets. regulated digital assets canbe classied as security tokens. Financial conduct authority(FCA), Prudential regulatory authority (PRA), Her Majesty's Treasury (HMT) and Swiss Financial Market Supervisory Authority (FINMA) has defined guidance for security tokens to ensure token arrangement is stable, interoperable and resilient. In this research proposition we explore the possibility of defining, procedures, mechanism, stress tests and simulation scenarios that provides insight into feasability of using HydraDX Omnipool AMM as a solution of choice for Alternate Risk transfer instruments. ### Objective To improve financial stability, operational resilience, interoperability and transparency for security tokens on HydraDX AMM. To explore potential risks highlited below by HMT as internal and external factors that impact the HDX dynamic system. ### User/Asset specific risks * **Authorisation requirements with associated threshold conditions:** The requirement to be authorised prior to operating. * **Prudential requirements, including capital and liquidity requirements, accounting and audit requirements:** Requirements relating to effective management of capital and liquidity, to protect consumers and financial stability * **Requirements for the maintenance and management of a reserve of assets** – obligation to have reserve assets underlying the token’s value and requirements to ensure the quality and safekeeping of those assets. * **Orderly failure and insolvency requirements:** Requirements to ensure issuers and service providers are prepared for modified resolution or administration, or insolvency. * **Notification and reporting:** Requirements relating to firms' disclosures to regulators and customers. * **Record keeping**: Requirements relating to firms' internal record keeping processes * **Conduct requirements**: Requirements relating to the rights that firms must provide toward customers. * **Financial crime requirements**: Requirements relating to proper implementation of anti-money laundering and counter-terrorist financing rules, among others. * **Outsourcing requirements**: Requirements relating to safe outsourcing of key services to ensure continuous and adequate functioning. * **Operational resilience, service reliability and continuity requirements:** Requirements to ensure business continuity in the event of physical, electronic, governance or other business failures. Add settlement risk and mitigation by dual-commit ### Technology specific risks * **Safeguarding the token:** Requirements principally on wallets and exchanges to ensure those entities are appropriately protecting users' tokens and the privacy and * **security of keys to those tokens.** * **systems, controls, risk management and governance:** Requirements relating to effective overall management of an issuer or service provider. * **security requirements (including cyber and cloud):** Requirements relating to safeguards against cyber security risks related to the technology and infrastructure used. --- ### _Relevance to Hydra AMM_ (e.g. component, subsystem, mechanism, implementation, cadCAD model,...) * Differential specification of a regulated assets for HydraDX Omnipool AMM (User decision, System decision & Processes) * Build mechanims that complement regulated assets * Build operational resilience and service relability mechanisms * Ability to simulate scenarios/ stress test * Mitigation of risk from internal factors * minimization of risk from external factors * Reporting (telemetry) for transiton states of HDX Dynamic system --- ### Expected Approach (e.g. analytical, numerical, experimental...) Identify, Design, Optimize, Validate (IDOV): * Identify: VOC, CTQ, Technical requirements and quality targets * Design: Evaluate system concepts, CTQs,develop transferfunctions, relate CTQs to design * Optimize: Robust design, DFM, Predict Reliability, Optimize SixSigma, predict quality level * Validate: Test and validate prototypes, assess performance and reliability, iterate design if necessary. --- ### Team Members (initial) --- ### Team Skills GDS Design Reg SME Business Analysis Coding --- ### Any Additional Desired Skills --- ### Desired Goal/Overarching Objective (may not be/unlikely to be achieved during the course) In this research proposition we explore the possibility of defining, procedures, mechanism, stress tests and simulation scenarios that provides insight into feasability of using HydraDX Omnipool AMM as a solution of choice for Alternate Risk transfer instruments. --- ### Attainable Goal/Specific Objective (may be/likely to be achieved during the course)