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Dusk isn’t just another blockchain. It’s a Layer 1 built from the ground up to fit the tough rules of the European Union’s MiFID II (Markets in Financial Instruments Directive II). Most blockchains try to be general-purpose, but Dusk makes regulatory compliance the main priority. The idea is simple: let people tokenize and trade Real-World Assets (RWAs) and digital securities, while sticking to the letter of the law.
Take MiFID II. This regulation shapes how Europe trades stocks, bonds, and derivatives. It’s all about making markets transparent and keeping investors safe. Dusk lines up with these demands right at the protocol level. For example, Dusk works closely with NPEX—a Dutch exchange that’s a fully regulated Multilateral Trading Facility (MTF). This partnership means digital securities created on Dusk can trade legally on secondary markets, with all the oversight and transparency that MiFID II demands.
There’s more. Dusk uses Zedger, an account-based system built specifically for tracking securities in a MiFID II-compliant way. Alongside it, Dusk deploys the Confidential Security Contract (XSC), which bakes regulatory logic—like whitelisting, dividend payments, or even transaction reversals—right into the token’s code.
Privacy is another tough nut. MiFID II wants transparency, but institutions need to keep certain strategies out of public view. Dusk solves this with Zero-Knowledge Proofs (ZKPs). With ZKPs, a participant can prove to a regulator that they follow rules—say, KYC or AML—without handing over sensitive transaction details for everyone to see.
Dusk isn’t just paying lip service to compliance. Its architecture narrows the gap between traditional legal frameworks and decentralized tech by targeting the core requirements of MiFID II:
- Reporting and Transparency: MiFID II forces strict pre- and post-trade reporting. Dusk’s built-in auditing tools give regulators access to the data they need, so they can check market integrity without blowing up privacy for everyone else.
- Investor Protection and Suitability: The law demands firms only sell complex products to investors who can handle them. Dusk uses Citadel, a self-sovereign identity tool, that lets users share proof of credentials—like professional investor status—without oversharing their personal info.
- Best Execution: Brokers have to get the best deal for their clients. Dusk’s integration with regulated venues like NPEX means on-chain assets trade inside a structured, legal market, fulfilling these best execution rules.
So, Dusk isn’t just another tech platform. It’s a regulated market structure, brought on-chain. The goal: move traditional finance into a digital, decentralized world, without losing sight of the complex legal realities in the EU.