However, the requirement for these institutions to use covenants or multisignature (multisig) mechanisms on the blockchain raises specific questions about efficiency and security. For instance, the argument is made that implementing stringent checks and balances within the backend server code of financial institutions might present a simpler alternative. This approach would enable the relevant governing bodies or regulatory authorities to release updated, signed versions of this server code bi-weekly, thus ensuring compliance and security measures are up to date.

The debate hinges on the balance between the ease of implementation and the robustness of security protocols provided by on-chain solutions like covenants or multisig. On one hand, updating backend server code bi-weekly could streamline the compliance process, making it less cumbersome for financial institutions to adapt to regulatory changes. On the other hand, leveraging blockchain technology through covenants or multisig offers transparency, immutability, and a decentralized verification mechanism that traditional server-based checks might not fully replicate.

This discussion underscores the evolving nature of financial technologies and the continuous search for optimal solutions that satisfy both regulatory requirements and operational efficiency. As the finance sector increasingly intersects with blockchain technologies, the choice between server-based security checks and on-chain mechanisms will likely remain a central topic of consideration for both new and established financial institutions.