In a 2-Way Peg (2WP) mechanism, certain operational aspects can attract regulatory attention, particularly related to the unlocking of 'secondary currency'. This process might be misconstrued by regulators as the creation of new currency rather than a straightforward transfer. This misinterpretation could arise from a surface-level analysis, especially if the currency on the secondary chain is initially generated in a locked state & subsequently unlocked during transfers.

When the secondary chain incorporates smart contract capabilities & a sidechain contract is established, the transition of funds from Bitcoin to the secondary chain's currency becomes a fully automated process. Even if a federation is in custody of the transferred funds, it lacks the capacity to prevent this automated transfer. This dynamic bears resemblance to the scenario where an individual receives a Bitcoin payment, where the recipient has no means to intervene & consequently, can’t be held accountable for the origins of the funds.

So, if the secondary chain's structure enables autonomous transfers & smart contract execution, the regulatory concern over the unlocking of secondary currency as a potential act of currency creation loses its footing. Instead, the process mirrors the inherent nature of Bitcoin payments, where recipients are passive participants without the capability to exert control over the funds' origin. nostr:note10a0aujtpzkg83uqrkr5rqlp2ql9rw6tttdxrrv3w5jath8gk4kxshwtklz